No one enjoys paying income tax, as it often means saying goodbye to quite a large chunk of your pay cheque. But most countries have progressive tax systems based on what you earn: in the US tax ranges from 10% to a much higher 37% as you move up the tax scale, while across the pond in the UK the first £12,500 ($16,100) people earn remains untaxed, with earners then paying 20% tax on their pay which rises to 45% for top earners. But there are countries where employees pay a lot less into the system. Click or scroll through to take a look at these low-tax nations, ranked by their top income tax rate.
As with the majority of countries in our list, Mexico has a progressive tax system, meaning you pay more depending on how much you earn. There are 11 tax bands in total, with the lowest being 1.9%, for those earning up to MXN 6,942 ($286/£221) a year. The highest tax band of 35% is for those who earn in excess of MXN 3,498,600 ($187k/£145k) a year. For non-residents living in the country on a visa or work permit tax ranges between 15% and 30%.
Residents of Malta have their income taxed at progressive rates from 0% to 35%. As in the UK, Maltese residents have a personal allowance of €12,700 ($13.8k/£10.7k) that isn't taxed. Tax rates then start at 15%, rising to the top band of 35%. There are also different tax rates for married people, single individuals, and parents. For foreigners who move to the country, only their income earned in Malta is subject to tax, and there's the possibility of applying to a special regime that charges a flat rate of 15% for money earned elsewhere. It's a nation interested in attracting sports players, and if you're a professional footballer, water polo player, athlete or licensed coach, Malta will tax your income at a special rate of 7.5%.
New Zealand is proud of its "favourable tax environment", taxing individuals 10.5% on the first NZ$14,000 (US$9k/£7k) they earn, which rises to 17.5% on earnings up to NZ$48,000 (US$30k/£24k), followed by an increase of 30%, and finally its top income tax rate of 33% on income over NZ$70,000 (US$45k/£35k). Not only is its top tax band relatively low, but New Zealand has no inheritance tax or general capital gains tax (apart from on some specific investments). The small and far-flung country also placed 8th in the 2019 World Happiness Report, making it the highest ranking non-European country.
Canada also has a progressive income tax scale, starting at 15% on the first CA$48,535 (US$36.5k/£28k) you earn, gradually rising to the top rate of 33% payable on income over CA$214,368 ($161k/£125k). Citizens also have to pay provincial taxes, which vary from territory to territory, which means that for the highest earners overall income taxation can reach up to around 50%. Low tax isn't the only thing the locals have to smile about; the country also has high life expectancies, a small population and good salaries.
Income tax in Poland has two rates; 18% for those earning up to PLN 85,528 ($21.9k/£16.9k), and 32% for those earning above it. However, as the average salary in the country is around PLN 59,172 ($15.7k/£12.2k) according to data from the Central Statistical Office of Poland, the majority of workers are on the lower tariff. In August 2019 the government waived income tax for those under 26 who earn less than the tax boudary of PLN 85,528 ($21.9k/£16.9k), in a bid to encourage the country's young population to remain in the country instead of seeking opportunities elsewhere in the European Union.
Tax bands in Jordan start at 5% for the first JOD 5,000 ($7k/£5.5k) earned, rising in 5% increments to 25% on income between JOD 20,000 ($28k/£22k) and JOD 1 million ($1.4m/£1m) when the top rate of 30% kicks in. Also, any income above JOD 2 million ($2.8m/£2.2m) will be subject to a 1% national contribution levy. Any income generated inside or outside of Jordan by any person is subject to these taxes.
Trinidad and Tobago allows residents a personal allowance of TTD 72,000 ($10.5k/£8k) every year, on which they do not pay tax. On earnings beyond that the Caribbean country has a tax rate of 25% for the first TTD 1 million ($148k/£114k) earned. On earnings beyond this, a 30% rate is applied. The country has a low unemployment rate of 2.8% according to 2019 World Bank figures, which is a large decrease since its peak of over 17% during the 1990s. However, despite being considered one of the richest countries in the Caribbean thanks to its oil reserves, 26% of its population are still living on less than $2.75 (£2.13) a day, according to the Borgen Project.
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Home to another progressive income tax tariff, tax kicks in after individuals have earned MYR 5,000 ($1.2k/£935). It rises in bands from 5% to Malaysia's top rate of just 28%, which applies to those who earn more than MYR 1 million ($241k/£186.9k). The country's highest-earning industries are mining and quarrying, real estate and education. According to the Department of Statistics Malaysia, the average monthly salary in 2018 was MYR 3,087 ($746/£577), meaning that average annual salary is MYR 37,044 ($9k/£6.9k), which is taxed at 10%.
Brazil has seen a lot of progress over the last decade when it comes to reducing poverty and improving living standards, and in January 2020 increased its monthly minimum wage to BRL1,039 ($240/£185). However, according to the OECD there are still only around 61% of working age people in employment. Brazilians don't pay tax until they have earned BRL 6677.55 ($1.5k/£1.2k) where the rate starts at 7.5%. The top rate of income tax sits at 27.5%, for those with earnings of BRL 16,380.80 ($3.8k/£2.9k) and above.
The Dominican Republic has seen strong economic growth in recent years. The International Monetary Fund (IMF) notes GDP growth of 5.2% in 2019, compared to 2.1% for the U.S. and 1.4% for the UK. Anyone earning over DOP 416, 220 ($7.8k/£6k) a year pays income tax, with the top rate of 25% reserved for those with a salary of DOP 867,123 ($16.2k/£12.6k).
Sri Lanka's tax bands start at just 4% but this only covers earnings up to LKR 600,000 ($3.3k/£2.6k). The rates rise gradually, and the country has a top income tax tier of 24% for those earning over LKR 3 million ($16.5k/£12.8k) a year. According to the IMF, the country has the second largest GDP in terms of purchasing power in South Asia (second only to the Maldives). It is also the 24th cheapest country in the world, according to Numbeo’s Cost of Living survey, making it a great option for those looking to move somewhere with a lower cost of living.
Egypt has a progressive tax system that offers a personal allowance of EGP 8,000 ($500/£390). Taxation then starts at 10% for earnings up to EGP 30,000 ($1,901/£1,474), rising gradually until it reaches the top band of 22.5% for earnings over EGP 200,000 ($12.7k/£9.8k). While recent reforms from the IMF have helped to lower unemployment and inflation, cost of living remains high for the country's citizens, and the percentage of Egyptians living below the poverty line has increased to 32.5% in 2018, according to the state statistics agency.
Singaporeans have a personal allowance of SG$20,000 (US$14.4k/£11k) before they have to pay tax. After that, tax starts at just 2%. The top level of income tax in Singapore is only 22%, which is not bad considering it is the seventh richest country in the world, according to data from the IMF and the Central Intelligence Agency. The country's citizens also benefit from not having inheritance tax or capital gains tax. In fact, the country's favourable tax system and various tax breaks for foreign investors mean that it is classed as a tax haven.
Residents in Fiji don't pay tax on the first FJD 30,000 ($13.5k/£10.4k) they earn. Income tax starts at 18%, but is then charged at 20% for those earning over FJD 50,000 ($22.5k/£17.4k), with the same rate applying to non-residents in the country. However, on top of this workers also have to pay social responsibility tax (SRT) between 13-19% of their salary, as well as a flat 10% environment and climate adaptation levy (ECAL) on their income.
The residents of this small island located between Great Britain and Ireland enjoy low income tax. Following a personal allowance of £14,000 ($18.1k), residents are taxed at 10% for the next £6,500 ($8.4k) of earnings. The rate then increases to 20% on annual earnings until they reach the tax cap of £175,000 ($226k) that means pay beyond this bracket is not taxed. The Isle of Man offers other benefits such as no inheritance tax or capital gains tax, and residents don't have to pay stamp duty when buying a property either. Perhaps the most attractive offering is for those looking to set up a business as there is no corporation tax.
Madagascar is the fifth largest island in the world. Its 26.9 million residents are subject to low income tax, with a top rate of 20% for earnings over MGA 350,000 ($94.42/£73.24). Before this threshold is reached a flat tax of MGA 2,000 (53 cents/40p) is paid. However, living standards are tough for the majority of the country's population. The World Bank estimates that under a quarter of citizens have access to electricity.
In Hong Kong tax starts at just 2%, rising to a top income tax rate of just 17% for earnings over HKD 200,000 ($25,758/£19,979). While income tax is low and salaries are high – an average of $45,050 (£33,316) a year for service professionals – cost of living is also notoriously high. In fact, according to Deutsche Bank's 2019 "Mapping the World's Prices", it is the most expensive place to rent in the world, with typical rent for a two bedroom apartment costing around USD$3,685 (£2,858) per month.
Costa Rica is a popular destination for people looking for a cheaper standard of living, particularly retirees. What's particularly inviting for those looking for a low-cost retirement is that fact the country doesn't tax anyone who earns their money – or pension – outside of Costa Rica. Those that are still working can enjoy the country's low income tax rate – a maximum of 15% for those earning more than CRC 929,000 ($1.6k/£1.3k) a month. For the self-employed rates go up to 25%.
Bolivia is among the few countries in the world that have a fixed flat rate for income tax. At just 13% it's one of the lowest in the world, and no taxes are imposed on money earned from other countries. During the years 2004 to 2014 the country's economy grew rapidly, thanks in part to expanding natural gas exports and new fiscal policies, and as a result, poverty decreased from 59% to 39% during this decade, according to the World Bank.
The Russian income tax system also charges a fixed flat rate of 13%. However, average salaries in the country remain low. According to the State Statistics Service (Rosstat), half of Russian workers earn less than 35,000 rubles ($550/£425) per month, and 775,000 people earn less than the minimum monthly wage of 11,280 rubles ($176/£136) per month. Non-residents in Russia pay a 30% rate of tax.
Located 40 miles from Hong Kong, the island of Macau is one of the richest places in the world. Its main industry is gambling-related tourism, which has brought in more money than Las Vegas in the last decade. The income tax here is based on a progressive system, with the top tariff of 12% only applicable to those who earn more than MOP 424,000 ($53k/£41k). According to the IMF, Macau's GDP is set to reach $143,000 (£110.5k) per person in 2020.
Residents in Montenegro are subject to an income tax of 9% on earnings below €751 ($819/£630) per month, which raises to 11% after that. This includes money earned from property, as well as sources outside of the country.
Bulgaria has a flat fixed rate income tax of 10%. While this may seem appealing, it's worth noting that the country also has a high rate of long-term unemployment: at 58.4% of people out of work it is the 4th highest of all OECD countries as of 2018. Living costs in the country are low, but the minimum monthly wage is around $340 (£263) a month, and households here have around half the purchasing power of other EU countries.
Guatemalans have a very low tax on their income, starting at 5% for the first GTQ 300,000 ($39.2k/£30.3k) earned, with the top tier of 7% reserved for those earning over this. The country's economy has seen strong growth in recent years, and has the lowest unemployment rate out of all Latin American countries, boasting a rate of 2.7% in 2017 according to the International Labor Organization. However, poverty remains high in Guatemala, and the World Bank estimates a further 175,000 people will be living below the poverty line in the country by 2021.
Saudi Arabia offers a very attractive 0% tax rate on income earned. However, in recent years it has introduced extra taxes such as its expat tax which was introduced in 2017. This initially charged expats 100 Saudi Riyals ($27/£20) per month, increasing to 400 Saudi Riyals ($106/£82) the following year. It was expected to rise to 800 Riyals ($213/£165) by this year. The new tax and other corporate measures have led 1.9 million expats to leave their lives in Saudi Arabia since 2017.
For many people looking to keep hold of more of their earnings, the United Arab Emirates is high on the list of potential countries. Not only is there no income or corporation tax, but salaries are high too. For example, an HR officer earns $5,445 (£4,213) a month on average, while retail sales managers can expect to take home around $7,078 (£5,472) a month, according to a 2019 study from Michael Page.
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The good news for anyone thinking of a move to the Bahamas is that the 0% income tax rule is based on residency, not citizenship. Therefore, anyone who has lived in the country for at least 90 days will qualify for the tax break. The country also does away with corporate tax, capital gains tax, and wealth tax.The bad news is that the Bahamas is the sixth most expensive country in the world to live in, according to a 2020 report by CEOWorld magazine, which based its results on things like accommodation, utility costs, and grocery prices.
Another country that doesn't tax income, Qatar is also one of the richest places in the world. Its oil reserves bring in tens of billions of dollars every year, and its strong economy means it has the lowest rate of unemployment in the world, standing at just 0.1% in 2019 according to the World Bank.
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