Taxes are one of the things that people talk about the most. It's easy to understand the low taxes in some countries. They can sometimes take up to half of a person's pay. Where you live and work can change how much money you keep and how much you have to pay in taxes.
If you own a business or invest money around the world, you need to know how taxes work in other countries. Setting up your business in an area with high taxes instead of one with low taxes could mean you have to pay a lot more in taxes. You might only have to pay half or none at all.
The Four Most Important Taxes
People in countries all over the world pay taxes in four main ways:
- There are no taxes, not even on your own income.
- People usually use the 183-day rule to figure out how much tax they owe on all of their income.
- People who are citizens have to pay taxes no matter where they live because of citizenship-based taxation. Only Eritrea and the US use it at the moment.
- Territorial taxation means that only the money that comes from inside the country is taxed.
These differences are very important. For example, Singapore only taxes income earned in Singapore because it has a system based on territory. On the other hand, people who live in Spain for more than six months have to pay taxes on all of their income.
Countries with high taxes in comparison to those with low taxes
A lot of people think that the only way to get good infrastructure and a good quality of life is to pay a lot of taxes. But this isn't always right. Many places with low taxes are known all over the world, have modern financial systems, and are great places to live.
In "tax hazards" countries, where taxes are high, the highest marginal rate is often more than 45%. But the UAE, Qatar, and Bahrain don't have a personal income tax and have strict rules for foreign investors.
17. France - 45%
France has the second biggest economy in Europe and is a cultural powerhouse all over the world. The highest income tax rate is 45%, so it stays on the high-tax list. The big social safety net and the work that the public sector does are what cause these levels. People in Monaco, which is right across the border, don't have to pay any income tax, which is interesting. A lot of people from France move there for this reason.
16. Spain
Forty-seven percent of people in Spain
There are a lot of people who would love to live in Spain, from its busy cities to its Mediterranean beaches. People who live in the country for more than six months, on the other hand, have to pay taxes on all of their income, which can be as high as 47%. The Golden Visa program is ending, and some parts of Spain have wealth taxes, which makes it less appealing to rich people.
15. Ireland
Ireland has drawn in big companies from all over the world because it has low corporate taxes. People, on the other hand, pay no more than 40%. The more money you make, the higher your tax rate is. This is called "progressive taxation." The economy in Europe is growing quickly, but people are having more trouble than they thought they would.
14. Luxembourg
People know that Luxembourg is a stable financial center, but its personal tax system is progressive and can go up to 42% at the highest level. The country is small, but its economy is very connected to Europe. It also has one of the best passports in the world. Even so, business owners don't want to live there because the personal tax rates are so high.
13. Germany
The top tax rate in Europe is 45%. A lot of public services are paid for with this money. People often say that the government in Germany is slow and expensive, but it's a great place to do business. Adding social contributions might make things even harder for people who live there. People in Germany usually start businesses to get more customers, not to pay less in taxes.
12. Portugal
Portugal is known for having a good quality of life and for having a lot of foreigners living in Lisbon. But people have to pay a lot of taxes, with rates that can be as high as 48%. People who don't live there pay a flat rate of 25%. Rich people who were new used to like Portugal more because its NHR system was more generous. The incentives are less appealing now that the government has made them stricter.
11. The Netherlands
The Netherlands is a big trade center in Europe. It is home to the port of Rotterdam and is a major business hub around the world. But you have to pay 49.5% in taxes if you make more than €75,000. The Dutch system pays for social services and infrastructure, but it also means that the people who make the most money pay some of the highest taxes in Europe.
10. Slovenia
Even though Slovenia is a small country, its progressive tax system can go up to 50%. Slovenia is one of the more developed EU member states that used to be part of the Soviet Union. It has made friends and brought stability to Western Europe. People who make a lot of money still have to pay more taxes than people who live nearby and have lower rates.
9. Israel
One reason Israel is a hub of innovation is that it has one of the highest numbers of startups per person in the world. A 50% top marginal income tax rate is the price of this level of economic success. It's still a good place for tech entrepreneurs, but starting a business can be hard because living costs and taxes are so high.
8. Belgium
Belgium is in the middle of Europe's transportation system and is where EU institutions are based. But the taxes on people are among the highest in Europe. People who make more than €48,000 a year pay half of their income. People in the country often feel like the government takes half of their income, which is a common source of frustration in a country that is otherwise rich and stable.
7. Aruba
Tourism and the island's natural beauty are well-known. Many people go to Aruba on vacation, but the personal income tax rate can be as high as 52%. Comparing it to nearby islands with better tax systems, this makes it one of the most heavily taxed places in the Americas.
6. Sweden
Sweden has one of the highest tax rates in the world, but it also has one of the best ratings for social equality and quality of life. The people who make the most money pay 52.3% of all taxes, both local and national. People who live there benefit a lot from public services, but business owners who want to be more efficient often look for tax planning help elsewhere.
5. Austria
Austria has a strong economy and high living standards, so it expects rich people to pay a lot of taxes. If you make more than €1 million, you'll have to pay a 55% tax on that money, as well as big capital gains and social security taxes. People say that Vienna is one of the best places in the world to live, but it costs a lot to do so.
4. Denmark
The personal income tax rate in Denmark is 55.9%, which is one of the highest in the world. This helps the welfare system. Surveys show that people are always happy and have access to a lot of social services. However, for people who move around a lot, the high cost of living in Denmark as a tax resident is often not worth it for their quality of life.
3. Japan
Japan has the highest taxes in all of Asia. Even though the economy is strong and the state is known for being creative, people here pay almost 56% of their income in taxes. Entrepreneurs in Tokyo have the best access to technology and business, but the taxes aren't as low as they are in other parts of the region, like Singapore or Hong Kong.
2. Finland
Finland has the highest taxes in Europe, but it also has great schools and a high quality of life. People who make a lot of money can pay almost 57% in taxes when you count city and church taxes. The system pays for a strong welfare state, but the high cost of living makes it hard for wealthy expats to move there.
1. Ivory Coast
The Ivory Coast is at the top of the list because it has a 60% tax on people's income. The country is still a frontier economy with few roads and little stability, even though it is a big player in West Africa's cocoa and energy markets. It is one of the least appealing places for international entrepreneurs to do business because of its high taxes and low standards of living.
Most of the time, these rates only apply to people who have a lot of money. But the real cost can still be high, especially when you include social security payments, municipal taxes, or payroll taxes.
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