Income tax is a tax levied by the government on income generated by individuals and businesses in their jurisdiction. Income can include wages, salaries, winnings from lottery prizes, interest on savings bonds, and so on. In the United States, both the federal and state governments levy an income tax, although some states do not collect state income tax.
Most countries have a progressive income tax system where those who earn higher incomes pay a higher rate of income taxes. Every year, citizens file and income tax return to determine their tax obligations.
In most countries, tax revenues account for about 80% of all government revenues for about half of the world’s countries. Revenue generated from income tax is used to pay government obligations and fund public services.
While the majority of countries have an income tax, several countries do not have an income tax. Many people look to these countries to establish residency and live tax-free.
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 discovery. Those looking to establish residency in a tax-free country should know that citizenship in Bahrain is very difficult, but permanent residency requires that you be retired, invest $135,000 in property, or invest $270,000 in a Bahraini company.
Brunei does not have an income tax, however, Brunei is not necessarily a hub for economic freedom. Permanent residency and citizenship are out of the question for those looking to establish themselves in a tax-free country, as you would need to gain the approval of the Sultan.
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 allows its residents to not pay income taxes. Permanent residency in Kuwait is generally difficult because it typically requires that individuals have a relative in the country or former employment.
The Maldives has a strong tourism industry that gives the island country little reason to levy an income tax on its people. Establishing citizenship or permanent residency is essentially impossible since the country doesn’t have a program for foreigners to become permanent residents. If it did, one would need to be a Sunni Muslim.
Monaco is one of the easier tax-free countries to establish citizenship in. Those looking to become residents will typically need to spend several million dollars. Because the zero income tax tends to attract very wealthy people, Monaco is likely to remain tax-free for the foreseeable future.
While Nauru does not have any income tax, it is not a good destination for those looking to live tax-free. Nauru’s economy is struggling and being tax-free is the country’s government’s last effort to keep its economy afloat.
Like other tax-free countries in the Middle East, Oman’s government has no need to levy income tax on its residents because of its oil and gas industry. Expats looking to move to Oman would usually need a job or family living there to do so easily.
Similar to its Persian Gulf neighbors, Qatar does not levy an income tax thanks to the wealth it accumulates from its oil industry. Qatar has a diverse and modern economy and is relatively peaceful, making it a great location for those looking to avoid taxes; however, it is still difficult to establish residency.
Saint Kitts and Nevis
Saint Kitts and Nevis is a tax-free country that, unlike many others, is easy to establish a residency at. To gain citizenship by investment, the price is far lower than in other nations s well. One can receive a passport and permanent residence for a $150,000 donation to its hurricane relief fund.
Although Somalia does not have income taxes, it is not recommended that one tries to live here for tax-free purposes. Somalia is a dangerous nation burdened by civil war and terrorism, as well as political instability.
With a very strong and free economy provided by a wealthy oil industry, the United Arab Emirates does not levy an income tax on its residents. Unlike other Gulf countries, establishing residency is a little easier in the UAE through visa policies.
Vanuatu, like other island nations, relies on tourism to fund its government, allowing its citizens to enjoy no income tax. It is generally easy and relatively less expensive to get a passport and residency in Vanuatu, as its citizenship by investment program is one of the easiest in the world.
Western Sahara is also an income tax-free country, however, it a disputed territory. Western Sahara does not have income from natural resources or a tourist industry, and its territorial disputes are likely the reason that they do not levy a tax.