How Income Tax Varies Around the World

As the old saying goes, the only things certain in life are death and taxes. But, the other certainty when it comes to taxes are that there are huge variations in the amount of income tax you will pay, depending on where you are in the world. Here are some of the countries where you will pay the very highest rates of income tax, and those where you won’t pay very much at all.

Variations in income tax

Income tax varies wildly, but the continent which generally has the highest rates is Europe, with the top rates standing at a whopping 50 per cent. However, there are also countries in the world where you pay absolutely ZERO income tax.

Highest rates of income tax

As already mentioned, EU countries have really high tax rates for their residents. Here are the most striking examples.

• Belgium, average of 42 per cent

Like many other countries across the globe, Belgium operates a progressive tax system where those who earn more, pay more. The top rate is a huge 55 per cent.

• Germany, average of 40 per cent

If you live in Germany, you pay a maximum amount of income tax of 42 per cent. Just like Belgium, it is a progressive tax, but you only pay the top rate on earnings over 250,000 euros.

• Denmark, average of 36 per cent

One of Germany’s many neighbours, Denmark, has a high taxation rate of its own. The highest tax rate is 55 per cent. Despite that, the Danes often top indexes for happiness and quality of life because its residents see their taxation system as an investment into their quality of life.

Lowest rates of income tax

So, we have had a rundown of the places in the world where you can expect to pay the highest rates of income tax, but how about the lowest?

• Montenegro, 9 per cent

In Montenegro, the tax rate is just nine percent, and its favourable tax regime is seen as one of the definite pros of living there. This is less than nearly everywhere in both the developed and developing world.

• Guatemala, 7 per cent

Residents in Guatemala are taxed at a progressive rate of between 5 and 7 per cent depending on income levels. However, Guatemala does guarantee a right to universal healthcare; a promise which has been hard to keep because of a lack of resources.

No income tax at all

From the lowest of the low, to no income tax at all, there are a number of countries in the world where you pay absolutely no tax on your earnings. They are Qatar, The Bahamas, Bermuda, Hong Kong, Monaco, Andorra, Oman, Saudi Arabia, the UAE, Bahrain, the Cayman Islands, Brunei and Kuwait. As you can see, most countries with a zero tax rate are in the Middle East and the Caribbean. They have gained reputations as tax havens and attractive places for expats to move to.

Just as with anything in life, a country’s taxation system comes down to balance. How much tax are its residents prepared to pay on their earnings in order for the government or authorities to provide a greater quality of life.