The day when the salary gets credited to your bank accounts is the sweetest day of the month. It is said that there are only two certainties in life: death and tax! But this might not hold for everyone around the globe. Not a single soul wants to see a huge chunk of their hard-earned money to be deducted by the taxman.
This is when a person starts thinking of uprooting and restarting their lives on an exotic island. Surrounded by coconut trees and giving a sip on your favourite cocktail, enjoying the sunsets and living a tax-free life may seem super appealing. For every person who bears the pain of seeing their salary getting diminished, this is an ideal way of retirement.
Well, certain countries charge 0 per cent income tax and 0 per cent corporate taxes. These countries are generally known as Tax Haven countries. It is natural to think about how these countries survive if they are charging such low taxes? The answer is quite simple, they have alternative revenue sources. Oil production, tourism or mining are the three main sources of revenue for these countries.
Here’s a list of 10 countries that offer 0 to minimum tax rates.
1. United Arab Emirates (UAE)
This Arab country situated in West Asia charges 0 per cent income tax on its citizens and 0 per cent corporate tax (except for oil and gas companies and subsidiaries of foreign banks). There are several oil-rich countries scattered throughout the Middle East that don’t charge income tax on the residents.
But among them, UAE is the most renowned country because of its stability in government, powerful economy and educational facilities. UAE has developed from the contrasting Bedouin tribes to one of the richest nations in the world, that too in just 50 years! UAE’s revenue main revenue sources are tourism and oil and gas.
Dubai is the most preferred destination in the middle-east and holds 66 per cent of the tourism economy. Whereas Abu Dhabi contributes 16 per cent and Sharjah contributes 10 per cent. This Arab country offers an excellent environment for business and according to World Bank’s Doing Business 2017 report, UAE ranked 26th among the best nations in the world for doing business.
Placed in the northern edge of Eastern Arabia at the extreme end of the Persian Gulf, the State of Kuwait is an emirate with an autocratic political system. The chief of this Aran nation is the Emir and the ruling family is Al Sabah. This Arab nation charges 0 per cent taxes on the personal income of its residents and 15 per cent corporate taxes.
This country is blessed with the sixth-largest oil reserve in the world, and it also has a significant stock of natural gas. The Kuwaiti dinar is the most powerful currency in the globe. This country is the fifth-richest country in the world and has a high-income economy.
In the Arab world, Kuwait has the highest Human Development Index. Kuwait’s economy is mainly Oil and Gas dependent and possesses 10 per cent of the world’s oil reserves. Al Zour Refinery, the largest oil refinery in the Middle East is situated in Kuwait.
Anguilla is a British overseas enclave lying in the Caribbean. With 0.75 per cent property tax and 0 per cent corporate tax, this small island country has become a popular tax haven in recent times. Anguilla charges 0 per cent income tax on its residents but in April 2011, the country faced with a mounting deficit introduced 3 per cent “Interim Stabilisation Levy”, Anguilla’s first form of Income Tax. It targets to obtain 15 per cent of its energy from solar power to become less dependent on imported diesel.
4. The Bahamas
The Bahamas is a country in the Lucayan Archipelago of the West Indies in the Atlantic. Lying in the north of Cuba, this country comprises over 700 small islands and is one of the richest countries in the Americas. The tax rate of this country is as soothing as its beaches. With zero per cent Personal Income Tax and Corporate Tax, Bahamas is on the list of top tax-friendly countries.
The island nation relies heavily on tourism for its revenue and tourism as an industry provides jobs to about half of the country’s workforce. Banking and offshore international financial services are the next most important sector. In the Panama Papers, it was disclosed that the jurisdiction of Bahamas has the most offshore companies and in the world.
5. The British Virgin Islands
The British Virgin Islands (BVI) are a British Overseas Territory in the Caribbean, lying in the northwest of Anguilla. BVI is a zero-tax or no-tax territory, including no taxes on income, sales, capital gains, profits, inheritance and corporations. Considered as a Tax Haven because of its opaque banking system, the economy of BVI rests on two pillars, financial services and tourism.
Financial services comprise 60 per cent of the GDP and the country is known for its offshore financial services. 51.8 per cent of the Government’s revenue is contributed directly from the licence fees for offshore companies, and further amounts are raised directly or indirectly from the trust industry sector.
6. Cayman Islands
With zero Corporate Tax, the Cayman Islands have become a paradise for Multinational Corporations to base subsidiary entities to protect some or all of their incomes from taxation. By not imposing any direct taxes, the Cayman Islands is heaven for its residents as well.
They are tax neutral, i.e., they do not have any income tax, or payroll tax, or capital gains tax, or property tax and no withholding tax. What a joy! The government earns most of its revenue from Indirect Taxes. Financial Services and tourism dominate the economy of the Cayman Islands.
Bermuda is a British Overseas enclave placed in the North Atlantic Ocean. Residents in Bermuda don’t pay personal income tax but the Government levies a Payroll Tax. The Corporate Tax in this country is as low as 7 per cent and has become a favourite place for Multinational Corporations.
Bermuda is an offshore financial centre because of its minimum standards in business laws and Zero taxation on personal income. The banking and financial services sector contributes to 85 per cent of the GDP and the Tourism sector with a 5 per cent share is the second-largest sector. The living standard in this country is high and as per 2019 data GDP per capita of Bermuda is the sixth-largest in the world.
The Republic of Cyprus is an island country in the Eastern Mediterranean Sea and surrounded by Turkey, Lebanon, Syria, Israel, Gaza Strip, Egypt and Greece. The Direct Tax rate of this country varies from 0 to 35 per cent. The Corporate Tax is 12.5 per cent and attracts several foreign companies. In 2012, the Eurozone financial and banking crisis affected the country’s economy.
In 2012-13 during the financial crisis in Cyprus, the government went into an agreement with the Eurogroup to split the country’s second-largest bank. The Cyprus Popular Bank would be split into a “bad” band that would be relaxed over time and a “good” bank would be absorbed by the Bank of Cyprus. Tourism, financial services and shipping are important parts of the economy.
This small Arab country located in Western Asia has the third-highest GDP per capita (PPP) in the world. This country has the third-highest Human Development Index in the Arab World and is classified as a high-income economy by the World Bank. Qatar is backed by the world’s third-largest natural gas reserve and it imposes zero per cent Personal Income Tax on its residents and 10 per cent Corporate Tax on companies.
The economy of Qatar was mainly dependent on fishing and pearl before the discovery of oil and natural gas. The country has a high standard of living and with no income tax, Qatar is amongst those countries with the lowest tax rates in the world. The unemployment rate of this country was 0.1 per cent in June 2013.
10. Hong Kong
Situated on the Western Pearl River Delta in the South China Sea, Hong Kong is a Special Administrative Region of the People’s Republic of China. With a capitalist mixed service economy, Hong Kong is characterized by low taxation, limited government intervention in the market, and a flourishing international financial market.
Hong Kong’s economy is dominated by the service sector and has come out to be one of the most preferred destinations for most global entrepreneurs and business enterprises. The Corporate Tax of Hong Kong is 16.5 per cent (maximum) and it imposes zero to 15 per cent taxation on Personal Income.
Edited by Aishwarya Ingle