Countries Without Income Taxes

Tax season—which can come four times a year if you pay estimated taxes—can lead to fantasies about living somewhere, anywhere, that lets you escape paying income taxes.

Not that taxes are unimportant. They enable governments to fund vital public works and services, in addition to building and maintaining the infrastructure that countless people rely on. Without taxes, there would be no safety-net programs, no bridge repairs, and no public transportation.

As of 2018, approximately 45% of American taxpayers said that their taxes were too high. How high are they? In the United States, the top effective income tax rate in 2019 was more than 40%. Combined with consumption tax, payroll tax, and what the study calls "social contributions [Social Security taxes, for example]," the top marginal tax rate for the highest-earning Americans was 47%, according to a Tax Foundation study of 41 countries.  That feels high, but most countries take even more: The U.S. ranks number 32 of the 41 countries on the list. Sweden takes the biggest tax bite (76%) and Bulgaria the smallest (29%).

All the same, given that income taxes can make up the majority of taxes owed—which they definitely do in the U.S.—it's no surprise that people might be curious about countries that offer an alternative.

How Countries Function Without Income Taxes

Income taxes are imposed by governments on the income generated by individuals and businesses within their jurisdiction. The United States' tax system is progressive, meaning that those who earn more in income will owe more in taxes than those who earn less. For instance, in 2017, the average federal individual income tax rate for the top 1% of the population was more than 25%, compared to a rate of less than 5% for the bottom 50% of the population. This is a result of the top 1% having a total net worth of $32.5 trillion, compared to the bottom 50%'s $1.5 trillion.

Given that so many nations rely on income taxes in order to generate revenue, it's easy to assume that any country that doesn't levy an income tax is going to be underfunded. This doesn't have to be the case, if the nation has an alternative primary source of revenue. The world has 23 countries without income taxes. Of that number, six are rich in crude oil reserves.

Additionally, just because these countries don't charge income taxes doesn't mean they offer a tax-free life. The Bahamas, for example, derives its tax revenue from value-added taxes (VATs), real property taxes, casino taxes, import duties, stamp duties, and license fees.

Life Without Income Taxes: Is It Possible?

Individuals and business in the U.S. looking to avoid paying income taxes have essentially three options.

1. The first is to take advantage of the 183-rule and regularly move from one country to another. You can't become a tax resident if you never stick around long enough to actually become a resident. This could get tedious fast.
2. The second option is to earn money in one country while living in another that doesn't tax foreign income. This will require renouncing one's prior citizenship, successfully immigrating to a new country where foreign income is tax-free, and acquiring a job in a country that isn't that new country.
3. Most will likely find option three the easiest: residing in a country that doesn't charge income taxes.

Of course, this isn't without its difficulties. Not only is obtaining citizenship difficult in some countries, the U.S. government isn't exactly keen on the idea of the wealthy abandoning ship. Over the years, thousands of millionaires have acquired citizenship in countries with lower tax rates. In order to limit potential income tax revenue from leaving the country, U.S. tax authorities have imposed rules to make it both difficult and expensive to renounce U.S. citizenship.

Currently, all U.S. citizens and green-card holders are legally obligated to file U.S. income taxes regardless of where they currently live. To avoid this, green-card holders must file Form I-407 with the U.S. Citizen & Immigration Service, indicating that they have abandoned their green card holder status. Citizens would need to renounce their U.S. citizenship following the rules and circumstances described in the expatriation tax provisions, a process that can become rather expensive.

List of Countries Without Income Taxes

If you or your business is still interested in moving to an income-tax free country, the first task is to decide where you're going to relocate. Some countries make it harder to secure citizenship than others, and each locale—some rather remote—comes with unique costs, challenges, and risks.

Below are the 23 countries that do not levy income taxes on their citizens and residents, organized alphabetically:

Bahrain

• Region: Western Asia
• GDP: 38,574.07 million (2019)

Formerly a British protectorate, the archipelago features a diverse economy. While oil and natural gas comprises 85% of the country's budget revenues, Bahrain also has a prominent hospitality and retail sector. However, occasional conflicts between protestors and security forces do occur as a result of ongoing political unrest.

In order to acquire a residence permit in Bahrain, one must be prepared to submit several forms and pay a substantial sum. Expats will have to either invest a minimum of 100,000 BD (or $265,246.70) or purchase property worth at least 50,000 BD (or $132,623.35). Applicants will also need to earn a monthly income of at least 500 BD (or $1,326.23) and have a fixed deposit of up to 15,000 BD (or $39,787.01).

Alternatively, foreign workers who receive a work visa from a local employer are eligible for a residence permit. Said employer is responsible for arranging the necessary paperwork. There's also a dependents residency permit for those married to a Bahraini citizen, though this will have to be requested by their employer.

Bermuda

• Region: North Atlantic Ocean
• GDP: 5,573.71 million (2013)

Bermuda is one of many British Overseas Territories that don't levy an income tax, though it is the oldest and most populous. The Rock has a long history of tourism, dating back to Victorian era. However, despite tourism accounting for a much larger share of employment, 85% Bermuda's GDP comes from its insurance and other financial services sector.

Outside of marrying a local (which still costs a $3,150 fee), you can receive a Permanent Resident's Certificate, which can require a period of prior residency up to 10 years and a $50,000 fee. It's also possible to get in through several work permits—specifically the New Business Work Permit, the Global Entrepreneur Work Permit, and the Global Work Permit—though the latter is only effective for a limited time period.

British Virgin Islands

• Region: West Indies
• GDP: $500 million (2017)

The British Virgin Islands is another Caribbean country heavily reliant on tourism, which accounts for approximately 45% of national income. Livestock is the prominent agricultural activity, as poor soil quality limits the potential for growing crops. The U.S. dollar has been the legal currency in the British Virgin Islands since 1959, as its economy is closely tied to the more populous U.S. Virgin Islands.

In order to become a permanent resident, a perrson must reside in the British Virgin Islands for a 20-year period. They must then submit a residence form in person to the Government of the British Islands Immigration Department.

Brunei

• Region: Southeast Asia
• GDP: 13,469.42 million (2019)

Like Bahrain, Brunei owes much of its economic prosperity to its many oil and natural gas fields, accounting for 65% of its GDP. This allows the Brunei government to provide free medical services and free education through the university level. The House of Bolkiah, the royal family of Brunei, has remained in power in Brunei for more than six centuries.

It can be very challenging to acquire a permanent residence permit for Brunei, which typically requires passing stringent tests on local culture, customs, and language.

Cayman Islands

• Region: Caribbean Sea
• GDP: 5,485.42 million (2018)

Like Bermuda, the Cayman Islands are both one of the British Overseas Territories and home to a prominent offshore financial center. The Cayman Islands, however, derive much more of their GDP from tourism, at approximately 70%. Despite its remote location, residents reportedly enjoy a standard of living on par with Switzerland.

Immigrating to the Cayman Islands isn't particularly difficult so long as one has resided there for at least eight years prior to applying (though no more than nine years prior to applying, outside of specific circumstances). This will require a filing fee of CI$1,000 (or $1,199.40). Once the permit is granted, there's an income-based annual fee of up to CI$12,500 (or $14,992.49).

Kuwait

• Region: Western Asia
• GDP: 134,761.20 million (2019)

Despite the fact that the public sector employs 74% of the population, Kuwait is heavily dependent on oil. However, with petroleum accounting for 92% of its substantial GDP, it's little surprise that Kuwait can still afford not to levy income taxes on its citizens. According to the CIA, foreigners seeking work in Kuwait can become victims of forced labor, due in large part to a sponsorship law that make it difficult for workers to escape abusive workplaces.

Since 2013, the Kuwait government has been working to reduce the number of expats in order to minimize competition for upper-management jobs. Additionally, expats over 50 years old are legally barred from working in Kuwait's public sector.

Maldives

• Region: South Asia
• GDP: 5,729.25 million (2019)

Although the island nation's tourism and fishing industries have seen substantial growth, Maldives is still facing a mountain of steadily accumulating debt. Given that 80% of the island is no higher than one meter above sea level, there is also a growing concern regarding the effects of both erosion and higher water levels brought about by global warming. Additionally, according to the CIA, both outsiders seeking work in Maldives and local residents can find themselves victims of forced labor.

Residence in Maldives is possible, though one must first acquire a Work Permit. This can be obtained through a local resident or company via the sponsorship program. Afterward, one will become eligible for a Resident Permit.

Monaco

• Region: Western Europe
• GDP: 7,188.24 million (2018)

Monaco is a popular tourism destination and—as with a number of no-income-tax countries—a major banking center. Note that companies will be charged a 33% tax on profits unless three-fourths of profits are generated within Monaco. Local residents have a standard of living similar to thriving French metropolitan areas.

Securing a residence permit in Monaco is costly. One must own or rent a residence of some sort, such as a house or an apartment, and have an account in a Monegasque bank. Requirements for an account: an initial deposit of €500,000 to €1,000,000 ($586,328 to $1,159,495).

Nauru

• Region: Central Pacific Ocean
• GDP: 118.22 million (2019)

Nauru was once one of the richest countries in the world due to massive supplies of a specific natural resource: phosphate. These days, while efforts are underway to extract "secondary phosphate" to keep the economy afloat, the island's future is uncertain. Other sources of government income include fishing licenses and the Australian Regional Processing Center for asylum seekers.

Supposedly Nauru once had an Economic Citizenship Program where citizenship could be expedited for a fee. However, if that information was ever available online, it is no longer available.

Norfolk Island

• Region: Australia
• GDP: N/A

Originally a failed British penal colony, Norfolk Island was later resettled by the descendants of mutineers from the HMS Bounty. The Australian external territory's primary driver of economic growth is its tourism industry. Rather than being heavily reliant on food exports, Norfolk Island is self-sufficient, producing its own beef, poultry, and eggs.

Australian and New Zealand citizens will have the easiest time immigrating to Norfolk Island, as they have access to an exclusive process. Foreign nationals looking to live, work, and reside there will have to fill out and submit a multitude of forms and documents.

Oman

• Region: Western Asia
• GDP: 76,983.09 million (2019)

Oman is another Middle Eastern country that's heavily reliant on oil and gas, which generating between 68% and 85% of government revenue. The country's leadership is working to diversify the economy by bolstering its tourism, shipping and logistics, mining, manufacturing, and aquaculture industries. Sultan Qaboos bin Said, Oman's longest reigning monarch, passed away in January 2020.

Oman's government is working to create more jobs due to the rising number of foreign nationals entering the country.

Pitcairn

• Region: Pacific Ocean
• GDP: N/A

Also settled by HMS Bounty mutineers, Pitcairn is the last remnant of the British Empire in the South Pacific. This British Overseas Territory's economy mainly revolves around fishing, farming, handicrafts, and postage stamps. The island's population is currently estimated at only 50 people.

Pitcairn's immigration process is almost astonishingly straightforward. All that has to be done is fill out a Settlement Application form, pay a fee, and then participate in an interview with the island's Deputy Governor.

Qatar

• Region: Western Asia
• GDP: 183,466.21 million (2019)

Qatar shares many similarities to Kuwait. Its economy is also reliant on oil, though in Qatar's case its energy sector rakes in additional profits from natural gas. Despite this, industry accounts for more than half of the country's GDP—which is also true in Kuwait. Unfortunately, according to the CIA, another similarity Qatar shares with its fellow Middle Eastern country is that it's a place where many workers are subject to forced labor. 

Those looking to reside and work in Qatar will need to have already secured a position at a local company, in addition to getting police clearance from their native nation. In 2017, Qatar replaced visa requirements for visitors from more than 80 countries, including the U.S., with a waiver system. This means, that visitors can arrive without a visa and stay for either 30 or 90 days, depending on national origin. (Americans are in the 30-day group.)

Saint Barthélemy

• Region: West Indies
• GDP: N/A

After being traded between France and Sweden from 1648–1877, Saint Barthélemy became a French overseas collectivity in 2007. The economy of the island primarily revolves around tourism and luxury commerce, with the former responsible for the largest share of local employment. There is a notably high cost of living.

Saint Barthélemy became an EU overseas territory in 2012. This has permitted its government to control the immigration process for foreign workers, including non-French European citizens.

Saint Kitts and Nevis

• Region: West Indies
• GDP: 1,050.99 million (2019)

The economy of Saint Kitts and Nevis relies on tourism, an industry that replaced the original mainstay, sugar, in 1970. In fact, the government shut down the sugar industry in 2005 after operating at a loss for several decades. Despite efforts to diversify its agricultural sector, Saint Kitts and Nevis has one of the highest debt-to-GDP ratios in the world.

As a partial solution to its monetary woes, Saint Kitts and Nevis provides economic citizenship programs for foreign nationals. Expats can obtain residence through financial investments in the island.

Somalia

• Region: Africa
• GDP: 917.04 million (1990)

Since the 1991 collapse of Siad Barre's authoritarian regime, Somalia has been plagued by factional fighting and currently lacks an effective national governance. There have been two interim governments—the Transitional National Government in 2000, followed by Transitional Federal Government in 2004. The country has an informal economy primarily consisting of livestock, money transfer companies, and telecommunications.

In 2015, Somalia federal government passed a new policy to limit the country's reliance on foreign nations and open up more jobs for the local workforce.

The Bahamas

• Region: West Indies
• GDP: 12,827 million (2019)

Tourism accounts for half of both the Bahamas' GDP and its labor force. The Archipelago's financial services sector, accounting for 15% of GDP, is considered the second-most important. Additionally, the Bahamas is the sole country in the Western Hemisphere that isn't part of the World Trade Organization.

As part of the Immigration Act of The Bahamas, immigration is possible for foreign investors via a residential property purchase of at least B$500,000 ($500,217), so long as one proves they have sufficient means to support themselves and any dependents and then resides in the country for up to 10 years.

The United Arab Emirates

• Region: Western Asia
• GDP: 421,142.27 million (2019)

Although the United Arab Emirates long derived most of its wealth from oil and natural gas, this Middle Eastern country successfully diversified its economy to the point that the energy sector only accounts for 30% of its GDP. Now the industries and services sector each account for nearly one-half of the UAE's total GDP. The country has a high standard of living and there has been a recent increase in spending on creating jobs and expanding infrastructure.

Part of the UAE's strategic plan for the next few years is creating additional job opportunities for foreign nationals. To work in the UAE, an expat must be sponsored by a local resident or business through the Kafala sponsorship program. However, visas are only granted temporarily and will have to be renewed. A loss of the sponsored jobs will mean having to leave the the country.

Turks and Caicos Islands

• Region: West Indies
• GDP: 1,022.31 million (2018)

The Turks and Caicos Islands have remained a British Overseas Territory since 1962, even after briefly becoming independent in 1982. The economy of these islands heavily revolves around tourism, financial services, and fishing. The service sector accounts for more than 90% of total GDP.

In order to become eligible for a residence permit, one must be of "independent means," rent/own a house, be capable of investing up to $500,000, or be married to a local resident. Those meeting any of the above criteria simply need to submit an application form to the Director of Immigration and pay a relatively small fee.

Vanuatu

• Region: South Pacific Ocean
• GDP: 917.06 million (2019)

Contrary to the typical island economy on this list, over a fourth of Vanuatu's GDP is derived from agriculture, which employs approximately two-thirds of the population. That said, tourism, offshore financial services, and fishing are also major industries. After tourism took a hit due to damage caused by Cyclone Pam, the government has been working to bolster the sector, in addition to ramping up livestock farming.

The path to Vanuatu citizenship is straightforward, if somewhat pricey. After completing the initial FIU clearance process, which includes a $10,000 fee, one must then make a donation of $135,000 to a single person or $185,000 to a family of four through the Vanuatu Development Support Program.

Vatican City

• Region: Western Europe
• GDP: N/A

The economy of the Holy See (the worldwide government of the Catholic Church) is primarily supported through investments, real estate income, and donations. The separate Vatican City state is a 121-acre walled area within the city of Rome. Both are ruled by the Bishop of Rome, otherwise known as the Pope. Vatican City gets by on the sale of stamps, coins, medals, and other tourist mementos, museum admission fees, and publication sales. In Feb. 2014, as part of a campaign to reform the Holy See’s finances due to a growing deficit, the Secretariat of the Economy was created to oversee financial and administrative operations.

Vatican City citizenship is limited to individuals in these specific circumstances: cardinals residing in either the Vatican City State or in Rome, Holy See diplomats, authorized residents of the Vatican City State, those with papal authorization to reside in the State, and the spouses and/or children of local citizens.

Wallis and Futuna

• Region: South Pacific Ocean
• GDP: $60 million (2004)

Like Vanuatu, 80% of Wallis and Futuna's earnings are derived from agriculture, in addition to livestock and fishing. The public sector is the largest employer in this French overseas collectivity, accounting for 70% of the population, though approximately two-thirds are unpaid. France is responsible for financing the public sector, as well as healthcare and education services.

As Wallis and Futuna is a French collectivity, access conditions are identical to those in France.

Western Sahara

• Region: North Africa
• GDP: $906.5 million (2007)

Western Sahara is a non-self-governing territory with a market-based economy, the main industries of which are fishing, phosphate mining, tourism, and pastoral nomadism. As a result of its unresolved legal status, Western Sahara's natural resources are often at risk of exploitation.

As part of an effort integrate Western Sahara into the Moroccan Kingdom, Morocco has established a substantial military presence in the territory and offered incentives to its citizens to immigrate there.