Comparison of Income Taxation in Tax Free Countries of the World
The system of the income taxation is the main source of the funds of any national budget. But still, not all the countries of the world put into practice such a system for their residents. Below there is a list of jurisdictions of the world where the fiscal legislation eliminates such form of budget payments as income taxation (tax free countries for expats doing business). Jurisdictions of the Persian Gulf or small island jurisdictions or small members of EU (Cyprus, Monaco, Andorra) are the typical examples of such jurisdictions. What countries are tax free? Let’s take a look at top 10 tax free countries for corporate and private persons with the best environment for doing business and living.
Countries in the Middle East: economic analysis and prospects
According to international rating agencies, countries of the Persian Gulf have taken strong positions in the list of the jurisdictions with liberal fiscal policy and relatively high economic indicators. For example, the United Arab Emirates and Qatar are among the ten leading nations along with Hong Kong.
It should be noted that the international analyses are implemented under the auspices of the World Bank. More than 180 countries were reviewed in the ranking, and the following factors underwent the thorough analysis:
- Indicators of the national economy;
- Legal framework and norms of the corporate law;
- Administrative requirements and conditions for carrying out the entrepreneurial activity.
In fact, the analysis represents the annual information report which reflects such aspects as the national fiscal policy, opportunities for reducing the due level, business expenditures, tax rates, and also initiatives for mitigation of the tax regime and reforming the fiscal legislation.
Such achievements in the international rating are clear indicators for the international business community. Entrepreneurs and businessmen understand that it says about the unlimited possibilities for business. The jurisdiction of the Persian Gulf, and in particular the UAE, is intended to attract more foreign investment into the national economy by creating a favorable investment climate.
The analysis says that the United Arab Emirates and the neighboring countries of the Persian Gulf provide the international business with the lowest rates in the world. Such an approach stimulates the inflow of the qualified manpower from all over the world into the region and attracts a stable flow of the direct foreign investments.
1. The United Arab Emirates
Over the last decades, the UAE has maintained the economic stability and has shown the highest indices of the Gross Domestic Product per capita (about 50 thousand US dollars). Besides the federal fiscal system fully excludes the corporate and income taxes. The UAE is free of dues.
The United Arab Emirates is the world's largest exporter of the oil and gas products, and that allows replenishing the national budget by the tax revenues from this economic sector. The enterprises and companies which are engaged in this industry, pay up to 55% of the profits to the budget.
Taxation of the other aspects of life is implemented on basis of the 5% rate which applies only to the incomes from lettings of the real estate.
The interest rate of the social contributions for the employers is 12.5%, but this rate is applied only to the hired local citizens. There are no obligatory social contributions for the foreign citizens.
The primary national income source of Oman is the money from exports and sale of the oil products. The international experts note that the monthly income from the oil sector exceeds 8 billion. This situation allows the country to release the local population and business from the corporate and personal income taxation. The following types of taxes are the obligatory payments:
- When buying or selling the real estate – 3% of the property value;
- Compulsory payments for social insurance – 6.5%.
Qatar has practically unlimited reserves of natural gas. According to the indices of the Gross Domestic Product per capita, Qatar has become the world leader in these terms (more than 80 thousand US dollars).
The local fiscal system of Qatar excludes the following types of dues:
- Income ND private property taxes;
- Taxes on capital gains, dividends, and royalties.
The rate of the compulsory social payments for private individuals is 5% and for the companies and enterprises – 10%. Imported products are liable to the 5% rate.
Kuwait is also included in the list of the leading countries regarding the export of oil and gas products. The country budget consists of the 95% of the oil sector of the economy. The norms of the fiscal law of Kuwait include the following obligatory social payments to the budget:
- For private individuals – 7.5% of the gained income;
- For employers of the legal entities – 11%.
The local budget revenues of Bahrain consist of the 70% of the funds from the oil sector. Enterprises and companies must pay 12% to the social insurance funds, for private individuals this rate amount 7%. All real estate transactions are subject to 3% due.
Taxation of the European countries
For clarity of the existing advantages of the UAE, the information on taxation in the European countries can be provided.
Sweden leads the list of the European jurisdictions which apply the highest rate of income taxation, here it totals 56.4%. According to international experts, such a fiscal policy was caused by an outflow of the skilled manpower out of this jurisdictions. Second and third places went to Belgium and the Netherlands, respectively 53,7% and 52%. The UK, Austria, and Denmark have shown the mark around 50-51%.
The lower positions hold the jurisdictions of the former socialist camp, in particular, Russia - 13%, Belarus-12%, and Bulgaria – 10%.
Against this background, we recall once again: the tax rate for business in the UAE – 0%.
Thus, even for a person, who does not possess any specific knowledge in the field of tax and fiscal legislation, the competitive advantages and opportunities for setting business in the United Arab Emirates become clear. And considering the fact that alongside with the business, incomes of private individuals are also exempted from taxation, such an attractiveness of the United Arab Emirates for highly qualified specialists and businessmen from all over the world becomes clear as well.