10 Countries with No Personal Income Tax

TEMPO.CO, Jakarta - Income tax is a mandatory levy imposed on individuals or entities on income received in the tax year. Income tax is a source of state revenue used to carry out infrastructure development, provide education and health facilities, and finance other public services.

Despite its necessity, several countries do not charge personal income tax to their citizens. PricewaterhouseCoopers (PwC) reports that 8 countries do not collect personal income tax out of a total of 150 countries.

PwC analyzed the main income tax rate which is the highest in each country, but forgoing regional taxes.

List of Countries with No Personal Income Tax

1. Bahrain

Individuals employed by other individuals, entities, or companies in Bahrain are not subject to income tax. However, everyone must pay social insurance contributions according to the rules of the Social Insurance Organization (SIO) in Bahrain. The current rate of contributions to the SIO is 23% for local employees (15% employer; 8% employee) and 4% for expatriate employees (3% employer; 1% employee).

2. Bermuda

Workers in Bermuda do not pay personal income tax, but the government levy payroll tax on all employers. Employers could deduct about 6 percent of wages for payroll taxes. Meanwhile, self-employed people have to pay payroll taxes themselves.

3. Cayman Islands

The Cayman Islands are nicknamed the World's Tax Haven because they offer tax freedom to their residents. The government collects state revenue through other means, such as cruise ship tourism, overnight fees, work permits, import duties, and financial transactions.

4. Kuwait

Citing Reuters, parliament member Yusuf Zalala told the International Monetary Fund (IMF) that Kuwait could not start imposing taxes on its citizens because the quality of the country's public services was not good enough. At the time, the IMF calculated that Kuwait would likely exhaust all its oil savings by 2017 if it did not reform its tax system.

5. Oman

As one of the income tax-free countries, Oman still collects social security contributions from local workers. The social security contribution is 17.5 percent (7 percent of salary and 10.5 percent from the employer). Not only that, employers are also required to pay insurance for work-related injuries in the amount of 1% of the employee's salary.

6. Qatar

Based on Qatar Law Number 24 of 2018, the income tax rate is 10 percent of taxable income in the tax year. However, the government accepts exceptions by considering the percentage of dividends by the company. In principle, Qatar has no personal income tax, but there are some exceptions. Local law defines personal income as income from wages and salaries. When someone carries out commercial activities, they must pay corporate income tax rates.

7. Saudi Arabia

Local workers in Saudi Arabia are not subject to personal income tax. However, expatriate workers who earn income in the country are subject to tax based on withholding tax (WHT) regulations. WHT rates vary, from 5 to 20 percent which are paid in the first ten days of the month following the month in which payment is made.

8. United Arab Emirates (UAE)

The UAE government does not impose income tax on individuals. However, there is a value-added tax (VAT) of 5 percent on purchases of goods and services. The UAE also levies excise taxes on certain goods that are harmful to health, as well as corporate taxes.

9. Bahamas

Apart from the eight countries reported by PwC, the Bahamas is also one of the countries free from personal income tax. According to The Caribbean Council, the Bahamian government rejected the IMF's call to implement a personal income tax of 10 percent. However, they will set corporate income tax at 15 percent, the draft law is targeted for completion in May 2024.

10. Brunei Darussalam

According to the website of the Ministry of Finance and Economy (MOFE) of Brunei Darussalam, individuals are not subject to income tax, while corporate income taxes are levied at 30 percent, oil and gas companies at 55 percent, starting from January 1, 2008. In addition, Brunei Darussalam citizens are not subject to VAT but must contribute 5 percent of their salary to a state-managed savings fund.

MELYNDA DWI PUSPITA

Editor’s Choice: Top 10 Cleanest Airports in the World in 2024; Mostly in Asia

Click here to get the latest news updates from Tempo on Google News