Who wouldn’t like to pay zero personal income taxes? (We certainly would!) If you’re open to moving to another country – and give up your citizenship, if you’re American – then this could be your financial reality, too. In today’s episode, we look at ten countries with no personal income tax, along with some other ways of legally reducing your taxes by moving abroad…
How you can legally pay little or no personal income tax in 2023…
For most working folks around the world, tax bills are one of their most significant expenses. And for most of us, parting with up to half our annual income – only for the government to squander it – does not sit well at all.
Now, if you’re an American, Uncle Sam will want a large bite out of your earnings no matter where you live in the world.
Unless, of course, you renounce your US citizenship – which is a complex process, and was nearly impossible during the pandemic. However, if renunciation is NOT on the cards for you – but relocation is – then a move to Puerto Rico could cut your effective income tax rate to the single-digit range.
And if you’ll be leaving the USA for elsewhere in the world, the Foreign Earned Income Exclusion (FEIE) could provide you with tax relief for up to $120,000 of your earned income.
But for most other nationalities, severing ties with their home tax collection agency tends to be a LOT simpler: All you really have to do is move abroad.
There are several countries in the world that don’t levy any personal income tax. And in general, the countries offering this perk do so to stimulate economic development and attract foreign investment, business, and skilled professionals to their shores.
All governments require income to function though, so in most tax-free countries, expect to pay some form of consumption based taxation. (E.g. Value-Added Tax (VAT), a.k.a. Sales and Use Tax, if you’re from the USA. More on these alternative taxes below.)
Which countries don’t have any personal income taxes in 2023?
Here’s a list of some of the countries that don’t levy personal income tax on their residents:
|COUNTRY||PERSONAL INCOME TAX||VALUE ADDED TAX (STANDARD RATE)||COST OF LIVING||ENGLISH PROFICIENCY|
|Saudi Arabia||0%||5%||Inexpensive (3/7)||Very Low (5/5)|
|Kuwait||0%||0%||Inexpensive (3/7)||Low (4/5)|
|Oman||0%||5%||Inexpensive (3/7)||Very Low (5/5)|
|United Arab Emirates (Dubai)||0%||5%||Expensive (5/7)||Moderate (3/5)|
|Qatar||0%||0%||Expensive (5/7)||Low (4/5)|
|Cayman Islands||0%||0%||(Extreme 7/7)||Very High (1/5)|
|Bahamas||0%||12%||(Extreme 7/7)||Native /Very High (1/5)|
|Bermuda||0%||0%||(Extreme 7/7)||High (2/5)|
|Monaco||0%||20%||(Extreme 7/7)||High (2/5)|
|Bahrain||0%||10%||Inexpensive (3/7)||Low (4/5)|
Source: Sovereign Cost of Living Index (cost of living and English proficiency data)
Ten countries with LOW personal income tax rates (2023)
|COUNTRY||PERSONAL INCOME TAX (2023)||SALES TAX / |
VALUE ADDED TAX (STANDARD RATE – 2023)
|COST OF LIVING||ENGLISH PROFICIENCY|
|Andorra||0-10%||4.5%||Inexpensive (3/7)||Low (4/5)|
|Macau||0-12% (progressive)||0%||Expensive (5/7)||Moderate (3/5)|
|Maldives||0-15% (progressive)||8%||Inexpensive (3/7)||Moderate (3/5)|
|Hong Kong||2-17% (progressive)||8%||(Extreme 7/7)||Moderate (3/5)|
|Montenegro||9-15% (progressive)||21%||Very Cheap (2/7)||Low (4/5)|
|Serbia||10%||20%||Very Cheap (2/7)||High (2/5)|
|Bulgaria||10%||20%||Very Cheap (2/7)||Moderate (3/5)|
|Paraguay||10%||10%||Very Cheap (2/7)||Low (4/5)|
|Hungary||15%||27%||Very Cheap (2/7)||High (2/5)|
|Russia||13%||20%||Inexpensive (3/7)||Moderate (3/5)|
NOTE: In addition to consumption-based taxes, there may also be social security contributions to consider in many of these countries – and they may not be cheap. Additionally, tax laws can be complex and subject to change, so it’s always a good idea to consult with a tax professional before making any decisions about your tax situation.
So as you can see from the above table, there’s no perfect place: Places like Qatar and Bahrain aren’t known as bastions of liberty – or for their pleasant climates. (Temperatures of up to 110 degrees Fahrenheit are routinely recorded in Qatar during summer.)
And even the “lifestyle destinations” like Monaco, Bermuda and the Bahamas have their downsides. (In the form of extremely high costs of living).
Yet if you can live with searing summer temperatures and bigger-is-better aesthetics, then Dubai in the UAE could certainly be worth considering. Thanks to their government’s continual focus on economic diversification, Dubai today is a global financial center and thriving hub for trade and commerce.
And with scores of multinational companies favoring the city as the location for their Middle East and Africa headquarters, it is a truly phenomenal place to build a career as an expat. Yet again, whilst average salaries here tend to be very generous, the cost of living is certainly not cheap…
When it comes to zero-tax destinations, you can typically choose between either less livable, or hellishly expensive.
Nonetheless, as we wrote previously, Dubai does strike a happy balance between the living costs, English language and quality of life considerations.
Yet there are scores more countries offering single-digit personal income tax rates – PLUS far better climates, and a higher degree of overall livability…
Georgia (the country), as a single example, has a graduated individual income tax, with rates ranging from just 1.00% to 5.75 percent. The country also has a corporate income tax rate of just 5.75%, making it a great place to run a business, too.
(And while its living costs are still fairly low, relatively speaking, rental accommodation is now costing a LOT more than it used to 18 months ago…)
So if you’re not sold on any of the zero-tax destinations featured above, stay tuned for a forthcoming episode on countries with low personal income tax rates – coming soon…