Discover the 15 top countries with no income tax, how countries eliminate their income tax and the difference between countries with low taxes and countries with no taxes.
How Can a Country Have No Income Tax?
As a citizen of a high-tax country like the US or Australia, you might wonder how countries with no income tax make ends meet.
However, the answer is simple: other sources of revenue.
To see how this works, look at two US states with no state-level income tax – Alaska and Nevada.
Alaska is a major oil producer, so roughly 90% of its revenue comes from the oil and gas industry.
In fact, Alaska even shares its oil money with its residents through a permanent fund. A family of four living in the state receives roughly $20,000 per year.
If it weren’t for federal taxes and bitterly cold winters, Alaska could become a popular destination for Nomad Capitalists.
With so much revenue, Alaska has no need to levy an income tax, and the same goes for oil-rich countries like Oman and Qatar.
Nevada, on the other hand, doesn’t have much in the way of natural resources, but it generates enough revenue from tourism to support its government without an income tax.
Countries with no income tax like the Bahamas and Maldives fund their governments in the same way. Since they bring in plenty of money from tourism, they can allow residents to live there tax-free.
LOW TAXES VS. NO TAXES
Although I’ve substantially reduced my global tax rate, I don’t exclusively stay in countries with no income tax.
Since only a handful of them exist, I also spend time in low-tax countries.
Low-tax and no-tax countries are functionally similar, but they use separate types of tax systems.
Countries with no taxes have a straightforward system where you don’t pay any income tax whatsoever. Low-tax countries, on the other hand, use territorial systems that only tax local sources of income.
Singapore’s territorial tax system, for example, attracts wealthy expats by only charging tax on local income – not foreign investments.
Living tax-free in a country with a territorial system can give you more options as far as second residences go, but you can end up paying tax if you want to rent your property there or invest in a local business.
Low-tax and no-tax countries are thus somewhat similar in that you can feasibly pay no taxes in those places, but in low-tax countries, you may need to pay in certain situations.
What are the Top Countries with No Taxes?
As of today, there are 15 countries with no income tax in the world.
The following list includes all countries without any kind of income tax. You may not be able to get residence or citizenship in all of them, and some of them aren’t exactly the most livable.
If you’re looking for more information on countries where you can establish residency and pay no taxes, here is the list of the 15 top countries with no income tax to consider: