Five Countries That Do Not Charge Income Tax from Their Citizens
Tax is charged by Government on the income or activity of individuals residing in the country. Two types of taxes are collected by Government; direct and indirect taxes. Income tax falls under the category of direct tax. It is levied on the total income of every individual including persons, firms, companies etc.
The rate of income tax varies in different countries depending on the income, country, economic policies etc. It is also differing in case of persons with businesses.
Generally all countries are charging income tax. The tax collected is used for the welfare of the people. But certain countries are not imposing income tax on their people. The following is a list of countries that do not collect income tax:
The United Arab Emirates
UAE does not levy any tax on personal income. This includes salary as well as capital gains earned in their territory. General business companies are also not bound to pay any tax except foreign banks and oil companies. Foreign banks are liable to pay 20% of their income earned or deemed to be earned in their territory. The oil companies should pay a flat rate on their income. This is 50% in all the Emirates except Dubai in which it is 55%.
The Common Wealth of the Bahamas
The Government of the Bahamas does not levy tax on income, wealth and capital gains. Neither corporate tax nor VAT is collected. Payroll taxes, license and stamp fees, and import duties enable the Government to meet the economic needs.
The Principality of Andorra
Andorra is renowned for its tourism, which is the main reason for it to flourish. It is not collecting tax on income, and gifts for its residents. But non-residents are charged 10% tax on the income earned by them in the country. However VAT is charged at 4% on most of the goods. Payroll taxes are paid at 5-9% of salary by the employees and 13% by the employers. The self-employed persons who reside in the country for more than 10 years pay 18% of their earnings towards social security.
The Principality of Monaco
Monaco does not impose income tax on all resident individuals of any nationality except French citizens. French citizens have to pay French income tax. Companies also do not pay any tax on their profits. But if the turnover of the companies is more than 25%, then they should pay tax at the rate of 33.33%. However payroll taxes are high in Monaco; an average of 35% of gross salary by the employer and 13% by the employees are paid towards social security.
The British Virgin Islands
The Government of the British Virgin Island does not levy gift tax, inheritance tax and capital gains tax. There is also no VAT, profit tax, estate duty or sales tax. The income tax is set to zero with effect from 2006 and pay roll tax is introduced instead. The payroll tax is charged at 10% and 14% from small and larger employers respectively out of which 8% is paid by employee. However for the first 10,000 US dollars of remuneration there is no payroll tax. Majority of revenue for Government comes from license fees. Other taxes include land and house tax, stamp duty, customs duties and miscellaneous taxes.