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While most nations rely on income tax as a key source of government revenue, a select group of countries, including several in the Gulf Cooperation Council (GCC), have adopted a different approach. These jurisdictions impose no personal income tax on residents, which attracts global talent and businesses seeking to reduce their tax liabilities.
But how do these countries fund public services without taxing income? The answer lies in a combination of natural resource revenues, consumption taxes, and strategic fiscal policy.
Below is a closer look at nations with zero or near-zero personal income tax burdens and the economic models that support this framework.
United Arab Emirates: No Income Tax but a Growing VAT Base
The UAE remains one of the most prominent tax-free jurisdictions for individuals. While the country imposes no personal income tax, it introduced a 5% Value Added Tax (VAT) in 2018 to diversify its revenue base. A 9% federal corporate income tax was also introduced in 2023 for business profits exceeding AED 375,000.
Saudi Arabia: No Income or Capital Gains Tax for Individuals
Saudi Arabia does not levy personal income tax, capital gains tax, or gift tax. However, expatriates employed in the private sector may be subject to a Zakat contribution via employers. The kingdom relies heavily on oil revenues and is implementing broader fiscal reforms under its Vision 2030 strategy.
Kuwait: No Personal or Wealth Taxes
Kuwait continues to maintain one of the world’s most favorable personal tax regimes. It imposes no income, inheritance, gift, or wealth taxes. However, corporate taxation applies to foreign entities operating in the country.
Bahrain: No Income Tax and Growing Indirect Tax System
Bahrain does not impose income taxes on individuals. Instead, it has adopted a VAT system (10%) and taxes specific sectors like telecommunications and hospitality. It also levies social security contributions on behalf of employees.
Oman: Personal Income Tax Coming in 2028
Currently tax-free for individuals, Oman has announced plans to become the first GCC country to introduce personal income tax. Set to begin in January 2028, the new tax will apply only to high-income earners, at an initial rate of 5%, as part of the country’s fiscal sustainability program under Oman Vision 2040.
Qatar: Wealth-Friendly and Tax-Neutral Environment
Qatar does not tax individual income, wealth, inheritance, or capital gains. Like other GCC nations, it has implemented a VAT system (5%) and applies corporate tax to foreign companies.
The Bahamas: No Income, Capital Gains, or Inheritance Tax
Outside the Gulf, The Bahamas is among the few nations with a fully tax-free regime for individuals. It imposes no income, capital gains, gift, or inheritance taxes. The country relies on VAT (12%), stamp duties, and tourism to support its budget.
While the absence of personal income taxes may seem appealing, these countries maintain alternative revenue mechanisms to fund public services. These include indirect taxes, corporate levies, and natural resource exploitation. Tax professionals advising high-net-worth individuals or expatriates should assess not only the tax benefits but also the regulatory environment, residency rules, and future tax policy developments in these jurisdictions.
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