Wouldn’t you want to research potential income taxes and how they compare to U.S. tax rates if you could live elsewhere in the world? Maybe, but there are other questions to consider as well. Whether single or married, your filing status affects which areas may have the highest income taxes. Furthermore, Slovenia, Belgium, Sweden, Finland, and Portugal—countries with the highest taxes on high incomes—are primarily distinct from those with the highest taxes on average income earners.
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Having children and being married can also affect outcomes. Although all four of the other top countries in each category are in Europe, Denmark has some of the highest taxes in the world for both single and married taxpayers.
This page focuses on the taxes you can incur based on your marital status. The Organization for Economic Co-operation and Development (OECD), a forum that enables governments from 37 developed and developing countries around the world—25 of which are in Europe—to cooperate for people’s economic and social well-being, provided this data, which is the most recent available from 2019.
The Takeways
- Income tax loads differ per country based on the amount paid into social insurance schemes and factors like age and homeowner status.
- There is a disparity between the highest and lowest income tax burdens among OECD countries—a list skews heavily toward European countries only.
- Taxpayers in various nations are also classified into several tax brackets according to their income level, marital status, and number of dependents.
- Many European nations provide tax incentives to expats who choose to live there.
- Most nations and the United States have double taxation agreements, preventing double taxes on specific types of income.
The countries with the highest income taxes for singles
Let’s examine the nations with the highest total average personal income tax rates for single, childless individuals. Germany (38.9%), Belgium (38.4%), Lithuania (35.8%), Denmark (35.3%), and Slovenia (33.7%) round out the top five. 2
1. Germany
Germany has a progressive tax system, implying that people with higher incomes pay more taxes than those with lower incomes. The nation imposes a progressive income and capital tax with a 45% ceiling. 4 Agriculture, forestry, company ownership, self-employment, employment, savings and investments, rental property, capital gains, and other income are examples of sources of taxable income. Thanks to the saver’s allowance, the first €801 in savings and investment income is tax-free. Dividends and interest are subject to a 25% withholding tax, whereas royalties are subject to a 15% tax.
In Germany, church tax is entirely deductible, and the government permits charitable contributions to be written off as long as they don’t exceed 20% of a person’s adjusted gross income (AGI). 6 Many other European nations impose church taxes.
Up to €9,744 in income is regarded as a personal allowance. It is not subject to tax. here are additional deductions for health insurance premiums, personal accident, life, unemployment, and disability insurance premiums, contributions to recognized charities, and up to €6,000 annually for training for a future career.
2. Belgium
The highest progressive tax rate in Belgium is 50%. Income derived from assets, employment, investments, and other sources is all subject to taxation. The nature of capital has an impact on the capital gains tax rate.
A 13.07% social security tax is paid by employees. In addition to a personal allowance based on filing status, the government permits deductions for business expenditures, social contributions, and 80% of alimony payments. 8 The allowance is €9,270.9 for 2023.
In Belgium, new regulations took effect in January 2022. A minimum AGI of €75,000 is required. The government permits a tax-free allowance of up to 30% of AGI. The program has a five-year duration with the potential for extension.
3. Lithuania
Lithuania taxes its citizens who make money at rates that reach a maximum of 32% for income exceeding €90,246. Till that AGI reaches 20%, personal income tax. Employment, business ventures, royalties, asset leasing, and “other” activities all result in taxable income.
Royalties, interest, and gains on the sale of property are examples of non-employment-related income taxed at a rate of 15% or 20%, just as capital gains. There is a 15% tax rate on dividends. Interest is not subject to withholding tax unless the recipient is a non-citizen of Lithuania, in which case a 15% withholding tax is applied.
Due to a significant increase in the highest income tax level, Lithuania appears to have provided a significant tax benefit for some individuals. From 2022 on, it will be €90,246. It was €81,162 in 2021. Moreover, a reduced social security tax of 6.98% is applied to any incomes above this threshold.
4. Denmark
The maximum rate of Denmark’s progressive income tax is 55.9%. Danish citizens are subject to an 8% labor market contribution tax, an 8% healthcare tax, an average of 24.98% in municipal taxes, 1,135.8 kr ($167.06) in social security taxes annually. Capital gains taxes that are indexed to the personal income tax rate. Both the inheritance tax and the gift tax have a 15% rate.
Taxable income includes wages, commissions, perks, business profits, fees, pensions, annuities, social security payments, interest and dividends, capital gains, and rental property income. A 0.70 percent voluntary church tax is also present.
Limited contributions to authorized Danish pensions, unemployment insurance, debt interest, charity contributions, unreimbursed work travel, and double households are all eligible for tax deductions. In Denmark, there is an expat plan; however, because the labor tax must still be paid, the rate for those who meet the specific expat conditions is 32.84%.
5. Slovenia
Individual income taxes in Slovenia range from 16% to 45%. Non-residents only have their income from Slovenia taxed; residents are subject to worldwide income taxation. Employment, business, agriculture, forestry, rent and royalties, dividends, interest, capital gains, and “other” are taxed income categories. For 2022, a 15% withholding tax is applied on rental revenue. The rate nearly doubled to 27.5% in 2021.
At 15.50%, the employee foots most of the pension and disability insurance bill. With a 6.36% share, health insurance is almost equal between the company and the employee. Slovenia has a total social security contribution rate of 22.10%.
Dividends, interest, and capital gains are taxed at a 25% rate. The progressive tax rates or this flat rate can be chosen by tax residents, nonetheless.
How the U.S. Compares
Among this group of average-earning singles without children, the United States ranks 22nd with a tax rate of 24.4%, making it the highest in the world. Chile (7%), Mexico (10.8%), and Korea (15%) have the lowest all-in average personal income tax rates for those without children.
If you have a high standard of life, numerous social insurance benefits, and believe that your taxes are being used effectively by the government, you may consider a nation’s high taxes a worthwhile trade-off.
Married couples with the highest income taxes
The nations with the highest average personal income taxes differ for married couples with one income and two children. Both in this group and the category for single people without children, Lithuania (35.8%) and Denmark (31.4%) place in the top five. Finland (30.2%), the Netherlands (27.7%), and Norway (27.5%) are among the top five nations, along with Lithuania and Denmark.
1. Lithuania
In addition to the information in the section above on taxes for single individuals, here is some more information concerning taxation in Lithuania. Residents must pay taxes on all of their income. In contrast, non-residents must pay taxes on their revenue from operations carried out through a fixed basis in Lithuania and income derived in Lithuania. Citizens of Lithuania are allowed an annual tax-free amount of up to €4,800, which decreases as their salary increases and is based on that amount minus 0.18x, where x is the yearly income minus the twelve months’ worth of minimum wages for the current calendar year. Moreover, consumers pay 21% value-added taxes on most goods and services.
2. Turkey
Income tax rates in Turkey range from 15% to 35%. Turkey charges income taxes on various income sources, including salary and wages, income from real estate, dividends, interest, and royalties, as well as other income types, including capital gains. There are deductions possible for some donations, pension and private health insurance costs, and medical and educational costs.
3. Denmark
Here is some additional Danish taxation information because we discussed tax rates in the previous section. Residents are required to file separately, and they are taxed on their worldwide income. Typically, capital gains from home sales are not subject to taxes. Most taxpayers receive an employment allowance plus a personal allowance of 46,200 kr ($6,802.22) each. Individuals pay property taxes, and inheritances received by individuals other than a spouse are subject to inheritance taxes. Moreover, consumers spend 25% value-added taxes on most goods and services.
4. Finland
Finland levies progressive income taxes on its citizens, with a peak rate of 31.25%. Individuals pay a public broadcasting tax and social insurance contributions. Finland collects income tax on capital gains from investments, earnings, wages, pensions, and social benefits. Federal, local, and churches impose taxes on earned income.
5. The Netherlands
In the Netherlands, all income is divided into one of three categories: 1) enterprise revenue from significant business holdings; 2) savings and investment income; and 3) income from salaries, wages, benefits in kind, pensions, and homeownership. After adding the three categories’ deductions and tax rates, the net income is subject to general tax credits. Progressive income tax rates range from 37.35 to 49.5%. These rates include social security taxes. Unless they have already sought a divorce, married couples must file jointly, and some unmarried couples must.
Tax Rates for Married Couples in the U.S.
With a 12.6% ranking in this area, the United States has the 31st highest tax rate. The Czech Republic (6.5%), Chile (7%), and Switzerland (10.7%) have the lowest all-in average personal income tax rates for married couples with one income and two children. 20 The OECD countries with the highest and lowest income tax burdens differ significantly.
The countries with the highest income taxes for single people are Germany, Belgium, Lithuania, Denmark, and Slovenia. In contrast, the countries with the highest income taxes for married couples with two children are Lithuania (again), Norway, Denmark, Finland, and the Netherlands.
Which countries have the lowest personal income taxes?
Chile at 7%, Mexico at 10.8%, Korea at 15%, Estonia at 15.6%, and Switzerland at 17.1% have the lowest all-in income taxes for single filers with no children. The following five, is order of ascending income taxes, are Israel, New Zealand, Spain, Japan, and Canada.30The countries with the lowest total income taxes for single filers without children are Chile (7%), Mexico (10.8%), Korea (15%) Estonia (15.6%), and Switzerland (17.1%). In ascending sequence of income tax rates, the following five are Israel, New Zealand, Spain, Japan, and Canada.
Tax Haven Countries: What Are They?
A tax haven nation is one where an employee or, more frequently, a business owner can reduce or avoid paying taxes. If you are a paid employee, it is very challenging to avoid paying taxes legally, but those who own a business and receive dividends or a salary from that business and can register that business in a tax haven may be able to do so. The British Virgin Islands, Bermuda, Guam, Taiwan, and Jersey are all well-known tax havens. Working with a cross-border CPA can help ensure that everything is done lawfully if you consider using this technique.
How Do Double Taxation Rules Work?
Double taxation should be avoided if there is a way to prevent it. Double taxation on the exact source of income is involved. When someone earns money from several diverse, frequently foreign sources, this is what happens typically. This is possible with a 401(k) and other tax-advantaged accounts like individual retirement accounts (IRAs). As many business owners in the United States are aware, their limited liability company (LLC) income may also be subject to double taxation in other countries because some of them, like Canada, do not recognize the business structure.
Conclusion
Due to the different rates at which each nation finances social insurance programs like healthcare and pensions for the elderly, income tax burdens vary significantly between countries. Social insurance taxes can be considerably higher than basic income taxes in some countries, such as the Netherlands.
Depending on personal criteria, including income, age, and health status, individuals receive varying returns on the amounts they pay into social insurance schemes. Each country offers its inhabitants different degrees of benefits.
Depending on their income level, marital status, and the number of dependents, taxpayers are classified into several tax brackets by their respective countries. Just because a nation has an extremely high or low total income tax rate doesn’t necessarily indicate how you would fare there, given your particular set of circumstances.
