Income tax is a tax levied by a government on income generated by individuals and businesses. In at least half of the world's countries, income taxes comprise approximately 80% of all government revenues, funding public services, the military, and the government itself. In some highly-taxed countries income taxes exceed 50%. On the other hand, some countries have no national income tax at all. The governments of income-tax-free countries typically enjoy a lucrative alternate source of income, such as a nationalized oil industry or tourism sector. In many cases, it is possible for a person to move to one of these countries, establish residency (and in some cases citizenship), and live free of income taxes in their own personal tax haven.
|Anguilla*||Brunei**||Oman**||United Arab Emirates|
|Bahrain||Kuwait*||Saint Kitts and Nevis||Western Sahara*|
|British Virgin Islands*||Monaco*||Turks and Caicos*|
Entries marked with * are classified as territories, not countries, but the United Nations. Entries marked with ** have no personal income tax, but do collect corporate income taxes.
In the United States, both the federal and state governments may levy an income tax, although some states choose not to do so. Income can include not only wages and salaries, but also winnings from lottery prizes, interest on savings bonds, profits from stock sales or other investments, and so on. Income taxes are typically paid annually, with citizens filing an income tax return each year to determine the amount of taxes they owe. In some cases, a person may have overpaid their taxes and will be due a refund.
Relinquishing one's tax responsibility is not as easy as simply moving to another country. In order to be accepted by the new country, one must usually establish permanent legal residence there, spend at least half the year living in the new country, and submit any needed paperwork. Even then, one would often still owe taxes to the U.S. government on any income over $120,000 USD unless they were to completely renounce their U.S. citizenship.
Most countries utilize a progressive income tax system in which individuals with higher incomes are taxed at a higher percentage than those who earn less. For example, a person earning $100,000 in a year might be taxed at 25% (leaving $75,000), while a $40,000 earner would pay something closer to 15% (leaving $34,000). The logical principle driving this system is that the person who earned $100,000 could afford to pay a higher percentage of that income than someone who earned only $40,000.
In addition to no-tax countries, which charge no personal income tax at all, there also exist "low-tax" countries, which either charge very low income tax rates (below 10%) or charge taxes only on profits earned locally. Singapore, for example, does not tax foreign income, so a person living there would pay no taxes on profits made on the U.S. stock market, but would pay taxes if they rented out their home in Singapore.
Like several of its fellow British Overseas Territories, this tiny Caribbean island chain is a known tax haven and levies no income taxes upon its permanent residents. Establishing permanent residency requires an individual donation of $150,000 USD or a $750,000 investment in real estate. One must also live in Anguilla at least half of the year.
The Bahamas does not impose income tax on its residents, regardless of where they earn their income. The government receives most of its revenue from its tourism and offshore industries.
Located on the Persian Gulf, Bahrain is a tax-free nation that receives much of its wealth and government revenues from its oil industry. While the country levies no personal income tax, it does require Social Insurance and Unemployment contributions. Those looking to establish residency in a tax-free country should know that citizenship in Bahrain is very difficult. Permanent residency requires that you be retired, invest $135,000 in property, or invest $270,000 in a Bahraini company.
Another British Overseas Territory, Bermuda has no income tax—though it does levy a payroll tax upon employers (and the self-employed), who may deduct up to 6% from employees’ salary to pay it. Land owners are also subject to property taxes.
This British Overseas Territory does not charge individuals any form of income tax. That said, it does charge employers (and self-employed individuals) a payroll tax, which could be passed on to employees in whole or in part.
Brunei does not have an income tax, though it does require a 5% contribution to the state social fund and does levy corporate income taxes. Moreover, Brunei is considered a fairly difficult place for non-citizens to live. Brunei is ruled by a dictatorial regime and is known to be unwelcoming to foreigners—prospective residents would need the official approval of the Sultan himself to establish permanent residency.
Like the Bahamas, tourism in the Cayman Islands is enough to provide the government with enough revenue without taxing its residents. Those looking to seek permanent residency in the tax-free Cayman Islands, one must make $145,000 per year and invest at least $600,000 in real estate and wait eight years for permanent residency.
Kuwait’s large oil industry enables its government to operate with no need to levy personal income taxes. The country does levy 15% corporate income taxes as well as both social contributions and a value-added tax (VAT) of 5%. Permanent residency in Kuwait is often difficult to establish because it typically requires that individuals have either Kuwaiti relatives or a formal employment contract in the country.
Located just south and west of India, this island nation's tourism industry is so strong that the government has no need to levy an income tax on its people. However, establishing citizenship or permanent residency is effectively impossible: The country has no program by which a foreigner can become a permanent resident—and if it did, the first requirement would be to be a Sunni Muslim.
The last remaining tax-free country in Europe, this affluent city-sized nation is one of the easier tax-free countries in which to establish citizenship. The monetary investment, however, is substantial. A residence permit can take as little as three months to obtain, but requires the applicant to deposit 500,000-1,000,000 euros (approx $514,000-1,028,000 USD) in a Monaco bank, in addition to buying or renting a home there.
Like other tax-free countries in the Middle East, Oman’s government has no need to levy income tax on its residents thanks to the profits from its national oil and gas industry. However, Oman does charge value-added taxes (VAT) on certain products, as well as taxing corporate incomes at up to 15% and may charge foreigners a 10% withholding tax. The move is also challenging. Expats looking to establish residency usually require either a job or relatives already living in the country. Moreover, Oman is a very conservative culture—purchasing a single bottle of wine requires a police liquor permit—which could be a difficult adjustment for many expats.
Similar to its Persian Gulf neighbors, Qatar accumulates substantial wealth from its oil industry and so does not levy an income tax upon individuals (though it does charge a 5% value-added tax (VAT) and employers must pay a 10% social security tax). Qatar has a diverse and modern economy and is relatively peaceful, making it a great location for those looking to avoid income taxes. However, establishing residency can still be challenging, and requires the applicant to become fluent in Arabic.
This Caribbean multi-island nation has not charged personal income taxes since 1980. It also offers an easy path to residency in the form of citizenship by investment. One can receive full citizenship, including a passport and full residency rights, for a $150,000 donation to the country's Sustainable Growth Fund, a $200,000-400,000 investment in an approved real estate project, or a $175,000-200,000 investment in one of the country's alternative investment opportunities.
Income earned in this oil-rich nation is not taxed. However, self-employed expats may have to pay up to 20%, particularly on non-employment income (such as overseas investments).
Although Somalia does not have income taxes, it is not recommended that one attempt to move here for tax-free purposes. Somalia plunged into civil war in the 1990s and has yet to fully recover. Civil unrest, terrorism, and political instability are common and portions of the country are still controlled by insurgents. As a whole, the country is currently an unsafe living environment and unstable investment platform.
Although the government of this British Overseas Territory does mandate payment into a national insurance system, it does not levy income taxes upon individuals.
With a very strong and free economy supported by a wealthy oil industry, the United Arab Emirates does not levy an income tax on its residents. It does levy a 5% value-added tax (VAT) on many goods and services. While the country lacks a program by which foreigners can become permanent residents, its visa process is more welcoming than that of most other gulf countries.
Vanuatu, like many other island nations, funds its government via tourism, which enables its citizens to enjoy a life free of income tax. Vanuatu also boasts one of the most welcoming citizenship-by-investment programs in the world, making the process of obtaining a passport and residency in Vanuatu both simple and relatively inexpensive.
Western Sahara is in the unique position of being both an income-tax-free nation and a disputed territory—the United Nations does not formally recognize the region as a sovereign country. Western Sahara is also unique in that it has no alternate source of income, such as prolific tourism or a nationalized oil industry. As such, Western Sahara's non-tax policy is likely the result of territorial disputes between local rulers (primarily Moroccan authorities and members of the Sahrawi Arab Democratic Republic). Compared to other, more stable options, Western Sahara seems a risky choice for a tax-avoidance residency.
There are several countries that do not have a personal income task: the Bahamas, Bahrain, Maldives, Qatar, Saint Kitts and Nevis, Somalia, United Arab Emirates, and Vanuatu.