Taxation stirs global debate like little else. In some nations, taxes are little more than a whisper while, in others, they roar, with the local Internal Revenue Service claiming up to half of your income.
The choice of where to plant your fiscal roots can dictate whether you relinquish a substantial portion of your earnings or keep it entirely.
Tip-toeing through the international tax minefield requires astute financial ability. After all, choosing where to be a tax resident is one of the most important strategic manoeuvres you’ll make in today’s globalised arena.
Countries swing dramatically on the tax spectrum: some offer zero-tax opportunities, while others can claim more than half your income. Understanding the diverse tax rates and regulations globally can transform a potentially hefty tax burden into a negligible or even non-existent one.
If that sounds appealing, then you’ve come to the right place. Nomad Capitalist offers our clients, just like you, a unique, holistic approach to crafting your offshore or tax plan so that you save money and go where you’re treated best. Contact us today.
The 4 Types of Income Taxes
Countries around the world usually implement one of four types of tax systems when it comes to taxable income: zero taxation, residential taxation, citizenship-based taxation or territorial taxation.
The general rule of thumb with the residential system is the 183-day rule. In other words, if you spend more than the allotted 183 days in a given country, your worldwide income will be taxed.
In other cases, just being a resident in a certain country is enough to become subject to the country’s tax on your worldwide income. Citizenship-based taxation is the most draconian form of all and is only used by the African country of Eritrea and the United States of America.
Citizens of these two countries will never escape the demands of their nation’s taxman. However, those living outside the country have the opportunity to exclude some of their foreign income from the country’s strict taxation.
Fortunately, there are countries that administer a territorial tax system – one in which countries only tax the income that was earned within their geographical limits. For example, if you live in Singapore, you’ll only owe taxes on income sourced from within Singapore.
It’s essential to be aware of the differences between these systems and keep tabs on which country uses which system. Once you know how each country operates, you can keep the citizenship of your country of origin, live in another country and earn money in another without having to pay taxes in any of them.
Tax Haven or Tax Hazard?
The majority of people are not aware of the existence of low-tax countries and just accept the taxation system imposed on them by their own country, even if they make money online and have their main customers in some other part of the world. Other folks are well aware of the ‘hidden gems’ or tax havens out there but argue that high tax rates are a necessity if you want a certain quality of life.
If you read our articles or follow our YouTube channel, you know that we travel the world extensively and you’ll know how much we appreciate using top-notch services wherever we travel. From experience, we guarantee that you will find a high quality of living in many of the countries where you would least expect it. Taxes are not invariably tied to the quality of life a nation can offer.
Figuring out which country to live in, which to earn money in and which to be a citizen of is where our Flag theory comes into play. We advise the people we help each month to become tax residents of a tax-free country where the government won’t try to get their hands on the money they earn abroad.
Remember, it’s all about going where you’re treated best.
There are a lot of low-tax countries with cities that rank high on the indices for quality of life and the happiness of their citizens and there are more than 160 countries outside of the Western world of which many are highly developed countries like Georgia, Costa Rica, Panama and Singapore.
High tax countries of the West do not have a monopoly on development, quality of living or happiness. In fact, they can sometimes bring the opposite.
Low-tax countries are often called ‘tax havens’, which is why we have taken the liberty of calling countries with the highest tax rates, ‘tax hazards’. You may live and work in such ‘tax hazards’ or plan to move there so we’re here to point you in the other direction.
Let’s take a look at the 17 countries with the highest income tax brackets.
17. France
Yes, with all that cheese, wine and ‘je ne sais quoi’ street vibe, France is truly a formidable country.
Europe’s fourth-most populous country, a member of the G7 and the EU’s second-largest economy by purchasing power parity, France remains a global power.
However, the country has some of the highest tax rates in the world.France hits people with a whopping 45% top marginal rate.
To put this in context Monaco, a low-tax country situated on the French Riviera, has no income tax and is one of the wealthiest countries in the world. Monaco’s low tax rates are undoubtedly one reason the French comprise almost 25% of Monaco’s citizenry.
After all, who could resist enjoying the same quality of life (or better) with none of the tax obligations?
16. Spain
From golden beaches to the Spanish tapas counter everywhere you turn, and all-over high standards of living, Spain is a happening place.
But this comes at a price. If you spend six months or more per year in Spain, you will become a tax resident in the country and, in certain instances, face the prospect of paying an outrageous 47% in taxes.
More bad news is that Spain also taxes your worldwide income. Sure, there are ways to plan around it, but it adds levels of complexity that you don’t need to deal with. To cap it all, Spain is currently in the process of jettisoning one of the EU’s most attractive Golden Visa programs.
There are better options.
15. Ireland
We’re big fans of Ireland when it comes to the quality of service and general friendliness of the nation (so much so that we decided to have our Nomad Mastermind Event in Dublin a while back).
Ireland is ranked as one of the wealthiest countries in the European Union and among the 25 wealthiest countries in the world in terms of GDP per capita. It’s one of the greatest examples of how development and growth were possible even after the financial crisis of 2008.
One factor contributing to that, besides hard work and the creative Irish spirit, was the relatively low corporate income tax rate. These relatively low rates were used by Google and Apple though Irish citizens are not quite as lucky and must pay a marginal income tax rate as high as 40%.
It’s not Europe’s highest tax rate, but its taxes are still high enough to make this list. Taxable income is charged in respect of all properties, profits or gains. A person resident and domiciled in Ireland is liable to Irish tax on their total income from all sources worldwide.
Earnings are taxed progressively, with low earners paying little or no income tax and a high rate applied to middle and top earners.
14. Luxembourg
For such a tiny country, Luxembourg sure has some big taxes. The Grand Duchy of Luxembourg (yes that’s its official designation) is a small EU member state nestled between Belgium, Germany and France.
The country is not necessarily famous for much and is generally known for being a safe and sensible country with a stable economy, government and banking system. Incidentally, like Ireland above and Portugal below it has one of the world’s best passports.
Unfortunately, it also has one of the world’s highest income tax brackets, applying a progressive system that targets top earners with a personal income tax rate of 42%.
13. Germany
As the powerhouse of Europe, Germany is one of the world’s strongest economies but it also has some of the world’s highest taxes. Still, surely high taxes are the price of success? Not exactly.
Germany is famously punctual but as anyone who has ever dealt with its bureaucracy will tell you, the German government is shockingly inefficient.In fact, German bureaucracy is the very definition of big government and that government is costly to maintain. Germany is often lumped with other so-called Central European countries, which includes countries like Poland and Austria.
You’ll note that many of the countries that feature on this list are generally regarded as more thrifty and sensible than their southern Mediterranean counterparts. However, despite this thrifty reputation these countries also maintain large social services programs, paid for by high taxes. (The wild card here is Italy, which, thanks to its flat-100 tax regime, instead is on our low-tax European countries list.)
In Germany’s case that’s a progressive tax system with a personal income tax rate of 45% for its highest earners.
12. Portugal
Portugal has a wealthy economy, ranking near number 50 out of the top-ranking global economies, with a GDP of approximately US$250,000.
Portugal uses tax to increase equality between high-income earners and low-income earners in the country and employment income earned is subject to a progressive income tax that applies to all who are in the workforce.
A long list of tax allowances can count as tax deductions, including a general deduction, health expenses, life and health insurance and education expenses.
11. The Netherlands
For a long time, the Netherlands was among the most prosperous countries in the world its developed economy and has been playing a special role in the European economy for centuries. In more recent decades, it was one of the founding members of what would later become the European Union.
The Netherlands has the 17th-largest economy in the world and its location in the heart of western Europe gives it prime access to markets in the UK and Germany, with the port of Rotterdam being the largest in Europe.
This trading powerhouse, and one of the most densely populated places on Earth, has an income tax rate of 49.5% for all income over €75,518.
10. Slovenia
Though one of the smallest countries in Europe, Slovenia still imposes a progressive income tax rate of up to 50% tax on its citizens. Slovenia lies at the tripoint of the Germanic, Latin and Slavic cultures.
Slovenia has just 2.1 million citizens and is among the smallest countries in the European Union. It’s one of many former USSR countries to join the European Union but has the highest tax rates amongst its fellow ex-communist states.
Still, Slovenia has a developed economy and is the richest of the Slavic countries by nominal GDP per capita in front of such regional powers, like Poland and Russia.
9. Israel
The rate of innovation in this small Middle Eastern country is impressive. Israel is one of the rare non-European countries on this list, with a population of just over 9 million citizens. It ranks eighth in terms of the number of startup companies in the world and was one of the world’s most resilient economies during the 2008 ‘Great Recession’.
Currently, Israel has a GDP per capita similar to Southern European countries. Because of its history, geographical position and high-quality university education system, it’s home to a highly motivated populace that’s driving the country’s high-tech boom and rapid economic development.
But all that comes with a price: a top marginal tax rate of 50%.
8. Belgium
Belgium’s strongly globalised economy and transport infrastructure are integrated with the rest of Europe. Its location at the heart of a highly industrialised region helped make it the world’s eighth-largest trading nation.
All of that sounds great until you realise that the country also has one of Europe’s highest rates of personal income tax.
You hear people complaining about tax all the time, complaining along the lines of, ‘I don’t know why I bother when the government takes half my money’.
Most of the time, the complainants exaggerate – unless they’re from Belgium. That’s because this is literally what the Belgian government does;it takes an outrageously high proportion of citizens’ wages in taxes.
Currently, if you earn more than €48,320, you’ll be taxed at a rate of 50%. And if you think that’s crazy, then remember this is actually an improvement because until recently, that rate could potentially go as high as 54%.
7. Aruba
Aruba is one of the most beautiful Caribbean islands and a popular island vacation destination.
The island is also one of the safest in the Caribbean if you exclude some petty crimes. But who cares about a little pick-pocketing when the government levies a staggering personal income tax rate of up to 52%?
It’s actually come down in recent years but does that make the tax rate any better? Well, not to us. We can’t digest the notion of people paying more than half of their hard-earned money to the government in taxes.
6. Sweden
Sweden is the 23rd largest economy in the in the world. Its standard of living and life expectancy rankings are among the highest in the world and the country has very low-income inequality.
Sweden has a developed post-industrial society with an advanced welfare state but the price of that is one of the world’s highest rates of personal income tax, with as much as 52.3% deducted from annual income. Still, that’s better than the 1996 rate of 61%.
Sweden has a taxation system for work income that combines an income tax (paid by the employee) with social security contributions (employer contributions that the employer pays). Though Swedes may be taxed heavily, sales of residential properties are exempt from taxation there.
5. Austria
There aren’t many German-speaking countries in the world but just about all of them are highly developed and Austria is no exception. It also demands that its people pay for that privilege, as the top marginal tax rates stand at 55% for anyone earning over €1 million.
Aside from the high-income tax rate, it also has a social security rate of 18%, bonus payments are charged at a rate of 6% and capital gains tax is 27.5%.
Austria is the 15th richest country in the world in terms of GDP per capita, has a well-developed social market economy and a high standard of living. But you have to ask yourself, ‘At what cost?’
Much of what you can find in Austria in terms of quality of life can be found in other countries with much lower tax rates. So, while it might be nice to visit Austria, don’t plan on making it your tax home.
4. Denmark
Denmark has a developed economy that ranks 9th in the world in terms of GDP per capita and 6th in nominal GDP per capita.
As it has a very small population, the Danish government imposed a total personal income tax rate of up to 53% in total taxes for the top earners in order to meet the needs of its people.
Among those needs is the Danish welfare state which, among other things, is based on the concept that citizens should have equal access to the different services paid for by taxes. Many see this as a justification for its high tax rates, which also allow for increased accessibility to social programs for the Danish people.
This may explain why Danes are considered among the happiest people globally, possibly due to their embrace of Hygge –a concept that celebrates moments as cozy, charming, or special, whether alone or with friends, at home or out.
We’ll always lean towards mindset and not taxation as the explanation for a country’s happiness level.
3. Japan
Japan is the third-largest national economy in the world, after the United States and China, in terms of nominal GDP. In terms of purchasing power parity, it is the fourth-largest national economy in the world after the United States, China and India.
This is all quite astonishing for a country that only has the 11th largest population in the world. Many attribute Japan’s success to their legendary work ethic. With its capital being home to more millionaires than any other city on the globe, Japan is the only Asian country amongst high-tax countries with a top marginal tax rate of 45%.
The supremacy of Japanese corporations in Asia in producing a variety of sophisticated technology and automobiles means the government has plenty of income to tax. It is also one of only a few countries with a culture that can be compared with Western counterparts in terms of popularity around the world.
2. Finland
Finland has the highest taxes in Europe and the second highest taxes in the world. The rates are so high that this small nation of just 5.5 million people earns a place near the top of this list of highest tax countries, courtesy of its top income rate of 44%.
However, Finland also adds additional taxes, including local municipal taxes of up to 10.8% and a church tax of up to 2.25%.Finland also has one of the highest capital gains taxes.
An interesting fact is that anyone who has arrived in Finland and stayed longer than six months will become, from the Tax Administrator’s point of view, a resident and any resident’s worldwide income is subject to Finnish tax with no distinction between the source country.
1. Ivory Coast
The long-troubled West African country, Ivory Coast, has the highest income tax rate in the world. People living there are giving away a whopping 60% of their income to the government.
That doesn’t have to be the case. Certainly, it’s a frontier market with a unique profile, but with such a low quality of life, we can’t find a reason why someone would settle for paying their government most of their income.
17 Countries with the Highest Tax Rates in The World in 2024: FAQs
Which OECD countries are taxed the most?
As of 2024, the average statutory top personal income tax rate is approximately 42.8% in Europe. The nations that get the shameful medal for highest tax OECD countries include Denmark, France and Austria, with rates ranging between 55 and 55.9%.
Where does the US rank in terms of highest taxes?
The US ranks at number 31 out of the 38 OECD countries as of 2023.
Is Canada the highest-taxed country?
No, but Canada does rank pretty high on the OECD’s list. It sits at number 23 out of 38 as of the 2023 report.
Is Australia a high-tax country?
Yes, Australia ranks as a high-tax country. As of 2023, the OECD reports that Australia ranks number 30 out of the 38 OECD countries.
What drives high taxes?
There are several drivers behind rising tax rates. But some of the most common causes of high-tax include more social welfare programs and large militaries.
Which country is tax-friendliest to retirees?
This depends on your situation, but Panama often scores high on the list of best tax countries for retirees. Not only does Panama not tax foreign sourced income, it also has a low-cost of living that attracts retirees.
Can you legally reduce your tax burden?
Yes, you can. Moving abroad, gaining tax residence in a tax-friendly country, moving your business offshore and other methods help wealthy individuals legally avoid high taxes.
Why Pay More?
As much as we’d like to hop on a plane and spend a weekend in Vienna, Paris or Tokyo, our advice is to think twice when it comes to becoming a resident of one of these countries otherwise you’ll be subjecting your income to their high tax rates.
The rates listed here are the top marginal tax rates, which means that you will only be giving away half of the income that you earn above the marginal tax bracket. So, even in a country with a top marginal tax rate of 50%, your effective tax rate could be as low as 35%.
But why pay 35% when you could be paying zero?
In some places, your effective tax rate could be well over 50%. In California in the US, for instance, once you add in federal taxes according to the city’s federal income tax rates, state taxes, payroll taxes and more, your effective tax rate could be as high as 54% though that depends on which federal tax bracket you fall in.
Clearly, there’s more to take into account than the top marginal income tax rate when going overseas. That’s why we offer holistic offshore planning that takes into account not just your taxes but also where you live, where you invest, where you do business and more to ensure that all those factors work together in your favour.
So, open your mind, get out of your comfort zone and pick a place that treats you best, which certainly doesn’t have to be one of the countries on this list.
Above all, don’t do this alone. Reach out to us and let our team do the heavy lifting for you so you can focus on what matters most to you by preparing to save in taxes. In short, become a client today.
