It seems that we just keep talking and writing and shouting about taxations, like Europeans or Americans about football.
Yes, I’m aware that they are not talking about the same thing, although it bears the same name. Same thing applies to taxation in different countries: how an average guy gets fired up in a football discussion and his favorite team is an equivalent of myself getting into any conversation involving taxes.
You have low or zero tax countries as well as countries with the highest tax, so not all taxation is the same- far from it. We want to make that distinction very clear. That’s how important taxation is to us and we are going to continue to talk about it. My belief is that in today’s connected and globalized world paying more taxes then we must, if to pay them at all, is an absolute nonsense.
Three types of taxation
You see, countries around the world usually implement one of three typical tax systems: residential, citizenship-based, or territorial.
The general rule of thumb with residential system is 183 days; in other words, if you pass the 183 mark while living in Country XYZ, your worldwide income will be taxed. In other cases, just being 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 Eritrea and the United States. Citizens of these two countries will never escape the demands of their nation’s tax man, although 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 in their geographical limits.
The importance of being aware of such systems is high — you can keep the citizenship of your country of origin, live in another country, and work in a third without having to pay taxes in any of them.
However, there are still a lot of people who are not aware of this existence of low tax countries and just accept taxation system imposed on them by their own country, even if they make money online and have their main customers in some other parts of the world. Some are aware, but they are arguing that higher taxations are a necessity if you want a certain quality of life but that’s not correct for at least a half century now.
On the other hand, some are well aware, but are arguing that countries with the highest tax are a necessity if you want a certain quality of life, BUT I can argue that is not the case for at least a half of the century now.
Tax haven or tax hazard?
This is where our Flag theory comes to work. Basically, this theory suggests having residency in a one of the tax-free countries that won’t try to get its hands on the money you earn anywhere else. It’s all about going where are you treated best and where being a resident of a country often puts you on the hook for taxes on your worldwide income.
There are a lot of low-tax countries with top notch cities, which top ranks in quality of living or happiness of their citizens. If you think more about it, there are more than 160 countries outside of the Western world. Some of this places with low taxes are developed cities and countries like Monaco, Georgia, Costa Rica, Panama and Singapore.
Here, we often recommend ”hidden gems” in terms of business environment, tax policy, quality of life etc., but now we just want to warn you. Low-tax countries are often called tax havens so we’ll take the liberty to call countries with highest tax – ”tax hazards”.
You maybe live and work in such ”tax hazards” or plan to move there and we are here to point you in the other direction.
Let’s take a look at 15 countries with the highest tax rates.
Deutschland, as Germans call it, starts this list of countries with the highest taxes in the world, with a tax rate of 47,50%. It’s the most populous country in Europe, if you don’t count Russia, and in many ways, it’s the powerhouse that drives Europe. It’s one of the main economies in the world and it has a strong export orientation. Simply put, when it comes to the economy, business and work spirit Germany is a celebrity amongst countries.
Individuals who are residents in Germany or have their normal place of abode there have full income tax liability. All the income earned by these persons both at home and abroad is subject to German tax. The German income tax is a progressive tax, which means that the average tax rate (i.e., the ratio of tax and taxable income) increases monotonically with increasing taxable income.
Germany is recognized for its large portion of specialized small and medium enterprises, known as the Mittelstand model. Around 1,000 of these companies are global market leaders in their segment. Berlin developed a thriving, cosmopolitan hub for startup companies and became a leading location for venture capital funded firms in the European Union.
I am a big fan of Ireland when it comes to the quality of service and general friendliness of the nation ( so much that I decided to have our Nomad Mastermind Event this year in Dublin). Ireland is ranked as one of the wealthiest countries in the European Union and among twenty-five wealthiest countries in the world in terms of GDP per capita. It’s one of the greatest examples that development and growth were possible even shortly after world’s financial crisis of 2008.
One of the things that contributed to that, besides hard working and creative Irish spirit, was relatively low corporate income tax rates, which was used by likes of Google and Apple, but Irish citizens were not quite as lucky – with income tax of 48%, it’s not one of the Europe’s highest tax countries but it’s taxes are still high enough to make this list.
Income tax is charged in respect of all property, profits, or gains. A person resident and domiciled in Ireland is liable to Irish income tax on his total income from all sources worldwide. The taxation of earnings is progressive, with little or no income tax paid by low earners and a high rate applied from middle to top earners.
Greece is strategically located at the crossroads of Europe, Asia, and Africa, has an astonishing history and culture and not so astonishing economy decisions. This ancient country gave us many great myths and legends, but it also shattered the myth that high taxes mean social haven.
Still, Greece ranks as 15th largest economy the European Unionnion but in term of taxes is in top 10- wit a high tax of 48%. To put it into perspective that is almost 3 times higher tax rate as compared to Georgia, which is on pair with Greece economy but, is one of the low-tax countries.
Income taxation in Greece is progressive. An individual in Greece is liable for tax on their income as an employee and on income as a self-employed person. Tax owed is calculated on their income earned in Greece and overseas.
Italy has it all at first glance. It’s one of the most populous countries in Europe with around 60 million people, it’s 8th world’s largest economy and third largest in Eurozone, it’s paved with beautiful landscapes from Alps mountain range, to Mediterranean coast and islands and has maybe the richest known history in the world.
The country is a founding member of the G7 and one of the worlds most industrialized countries. It has a large number of dynamic small and medium-sized enterprises, which are the backbone of the Italian industry.
This has produced a manufacturing sector often focused on the export of niche market and luxury products, that if on one side is less capable to compete on the quantity, on the other side is more capable of facing the competition from China and other emerging Asian economies because of the quality. But high-income tax of 48,80%, imposed by the government, don’t help them there. Italy’s high tax rate is the single most problematic factor for doing business in the country, according to the WEF, beating its government bureaucracy, which is a problem throughout whole Southern Europe.
Italy’s high tax rate is the single most problematic factor for doing business in this country, according to the WEF, beating its government bureaucracy, which is a problem throughout whole Southern Europe.
Slovenia lies at the tripoint of the Germanic, Latin, and Slavic cultures. This small ex-Yugoslavian state was the most advanced communist part of the world. Currently, it’s most popular for being home-country first lady of the United States-Melania Trump.
Slovenia has just 2.5 million citizens and it’s among smallest European Union countries. It’s amongst former Communist countries to join the European Union, but it’s also the highest tax country among former Communist states with the tax rate of 50%.
Still, Slovenia has a developed economy and is per capita the richest of the Slavic countries by nominal GDP in front of such regional powers like Poland and Russia.
Rate of innovations in this small Middle-east country is staggering. As one of the rare non-European among countries with the highest tax, Israel has just 8.5 million citizens bu also has the second-largest number of start up companies in the world after the United States.
Because of its history, geographical position and high-quality university education, it is a home to highly motivated and educated populace which is responsible for spurring the country’s high technology boom and rapid economic developments. But all that comes with its own toll, tax rates here are 50%.
Israel 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.
This Europe’s third most populous country is still a global power, member of G7 and world’s ninth largest and the EU’s second largest economy by purchasing power parity. With 31 of the 500 biggest companies in the world in 2015, France ranks fourth in the Fortune Global 500, ahead of Germany and the UK, but that may be also attributed to high taxes in this country, which stay on 50,20%.
Furthermore, there have been proposals to increase the tax rate for those earning more than 1 million EUR to 75%. To put this in context, Monaco, one of the low tax countries, that is situated on the French Riviera has no income tax on individuals subject to some conditions and that’s why French comprise almost 30% of its citizens.
Finland or ‘‘country at the end of the world”, as it was once deemed, therefore the name, is one of the few Nordic high tax countries. Days last eternity here during the summer, but ”winter is always coming and a long night with it. ”
Being among most depressed people although country welfare is among the top in the world, high tax rates may also contribute to that. They are so high that this small home of just 5.5 million people make top 8 in this list of highest tax countries- courtesy of its 51.60% tax rate.
An interesting fact is that anyone who has arrived in Finland and stayed longer than 6 months will become, from Tax Administrator’s view, a resident. The residents’ worldwide income is subject to Finnish tax so that no distinction exists between the source country.
7. The Netherlands
The Netherlands has a developed economy and has been playing a special role in the European economy for many centuries, also being one of the founding members of what will later become European Union. The Netherlands has the 17th-largest economy in the world.
The Dutch location gives its prime access to markets in the UK and Germany, with the port of Rotterdam being the largest port in Europe.
Long time among the most prosperous countries and maybe even most prosperous at certain point, this trading powerhouse and one of the most dense populated places on Earth, has an income tax rate (income tax plus mandatory pension, social security and state funded medical care payments, all of which are a percentage of income up to a maximum) of 52% for people under the age 65, on all income over € 66.000. Its government also charges capital gains tax of 25 %, land transfer tax of 6 percent and inheritance tax of up to 40 %.
This country, shared among two main linguistic groups – Dutch-speaking Flemish and French-speaking Walloons, that the European Union and NATO call its home, represents highest tax country in Western Europe with the tax rate of 53,70%.
Belgium’s strongly globalized economy and its transport infrastructure are integrated with the rest of Europe. Its location at the heart of a highly industrialized region helped make it the world’s 15th largest trading nation.
Belgium was the first Continental Europe country to undergo Industrial Revolution and since then it is among most developed countries. But, recently, the unemployment rate of Wallonia is over double that of Flanders and therefore this country is today politically divided more then ethanin the last century or two.
One of the few German speaking countries in the world is one of the most developed, like every other German speaking country. It also demands from its people to pay for that privilege, as tax rates stand at 55%. Aside from the high-income tax rate, it also has a social security rate of 18 %, bonus payments are charged 6 %t, and capital gains tax is at 25 %.
Austria is the 12th richest country in the world in terms of GDP per capita, has a well-developed social market economy, and a high standard of living.
Denmark has a developed economy that ranks 18th in the world in terms of GDP per capita and 6th in nominal GDP per capita. The Danish welfare state is, among other things, based on the concept of citizens having equal access to the different services paid for by taxes.
As it has a very small population, Danes’ government imposed a total tax rate equivalent to 55.80% of per capita income in order to meet the needs of its people. Many see this as a justification for its high tax rates, which also allows for increased social program accessibility for the Danish people.
Maybe this is part of why the Danish are viewed as some the happiest people in the world. This and Hygge concept, used when acknowledging a feeling or moment, whether alone or with friends, at home or out, ordinary or extraordinary as cozy, charming or special.
Japan is the third largest national economy in the world, after the United States and China, in terms of nominal GDP and the fourth largest national economy in the world, after the United States, China and India, in terms of purchasing power parity which is astonishing for a country that sits at 10th place in term of population, mainly thanks to their legendary work ethics.
With its capital being home to more millionaires than any other city on the globe, Japan is with Israel, only Asian amongst high tax countries, with a tax rate of 55,95% on income. Supremacy of Japanese corporations among Asian in producing a variety of sophisticated technology and automobiles means there is plenty of income for the government to tax.
It’s also one of only few countries which culture can be compared with Western ones in terms of popularity around the world.
Portugal is developed and high-income country, with the 45th largest economy in the world and 56,50% tax rate. Portugal uses tax to increase equality between high-income earners and the low-income earners in the country. Employment income earned is subject to a progressive income tax, which applies to all who are in the workforce. Furthermore, a long list of tax allowances can be deducted, including a general deduction, health expenses, life and health insurance, and education expenses.
During the 15th and 16th centuries Portugal started a major chapter in world history with the New World Discoveries of their fantastic fleet and played a crucial role in world history as they were the forst global empire. Portugal is unique in way that it’s only European country that had its capital, for some time, outside of Europe, that being Rio de Janeiro.
Sweden is the 7th richest country in the world in terms of GDP per capita. The standard of living and life expectancy rank among the highest in the world and haslow-incomeome inequality.
Sweden is a developed post-industrial society with an advanced welfare state maybe because they highest income tax rate in the world, with a 57,10% deducted from annual income. Sweden has a taxation system for income from work that combines an income tax (paid by the employee) with social security contributions (employers contributions) that are paid by the employer. Though Swedes may be taxed heavily, sales on residential properties are exempted from taxation there.
Sweden is the seventh-richest country in the world in terms of GDP per capita. The standard of living and life expectancy rank among the highest in the world and has a low-income inequality.
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