The 2018 STC TAXATION INDEX
This year the STC Taxation index by Global Residence Index has extended the number of jurisdictions it has reviewed. Importantly, we have referenced all our information with the official governmental source in applicable cases. Many tax resources are available per country, but tax rates can vary nationwide. This is why our taxation index compiles tax rates applicable to a specific city, as one relocates to a city rather than living all over a country. Our index ranks the taxation system of a country based on how favorable it is to HNWI relocating to the jurisdiction. In this report we will mostly focus on the two extremities of the ranking: those that are tax-friendly, and those who aren’t. The amount of wealth you possess will usually make a significant difference in the ranking of the country. Furthermore, the activity one might have in his new country of residence will define where that country stands. Therefore, our ranking should be taken with a grain of salt. There might be no debate that the Cayman Islands have a more favorable taxation system for the wealthy than France, but between France and Denmark, an argument can be made on both. The general trend is higher tax on income, consumption and social security. Tax on investment remains low in comparison to promote further investment.
The data was researched during the month of January 2018. The vast majority of the information was taken from official government sources; the remainder was taken from credible external sources (see Source). The information represents the rates for the year 2018. The 2018 STC Taxation Index is mostly based on the “Chinese Standard” and net worth of $15m+. All rates are applicable to a tax resident.
Source: Refers to the system of taxation on personal income depending on its source. Usually the taxation system will define by territory a source as local or foreign. The possibilities, if income is levied, are Territorial (tax is only levied on local income), Residential (tax is levied on worldwide income of residents) and in rare cases, on Citizenship (tax levied on worldwide income as long as you are a citizen of the country). No taxation and territorial taxation is more favourable; taxation by citizenship is not.
Income tax on 100K: Refers to the personal income tax rate imposed on an annual employment salary of 100,000 USD filed jointly. No dependant (child) deductions were added. For countries that levy incremental tax, the exemption and social security deductions were calculated. Certain jurisdictions can levy tax on the federal, regional and municipal level.
Income tax $1M: Same methodology as for $100,000, but the tax rate applicable for 1,000,000 USD.
Corporate tax: The general tax rate applicable to large businesses. It’s a tax on profit unless otherwise stipulated. The rate can be different for specific industries like oil and gas, and banking. The rate is also the highest tax rate in the case of incremental tax rate. Certain jurisdictions can levy tax on the federal, regional and municipal level.
General Sales Tax: The General Sales Tax can also be known as the Consumption Tax or Value-Added Tax. The indirect tax levied on the sale of general goods and services. Certain products like alcohol and cigarettes generally have higher rates and food has lower rates. Certain jurisdictions can levy tax on the federal, regional and municipal level. Social Security Total: The total charges paid by employer and employee on wage. The rate is usually the normal rate, as it can vary based on profession, age and income. It can comprise various benefits like pension, health care, unemployment, etc. Many of them are capped. Inheritance tax(children): The tax on inheritance levied on a resident’s estate passed on to his children (linear). The net worth of the assets of the deceased is estimated at the maximum rate. Reading of the additional notes is usually required as exemption amount are very common. Furthermore, some jurisdictions might not levy tax on inheritance, but charge a stamp duty on the transfer of assets. Capital gain on local publicly traded shares: Refers to the tax on capital gains made on the sale of publicly traded shares on the local stock market by an individual after more than three years of holding period. The tax may vary depending on the proportion of ownership in the company. Our listed rate is for small share of ownership.
Dividend tax on local publicly traded shares: Refers to the tax applicable to the dividend paid by publicly traded companies on the local stock exchange to an individual. Our listed rate is for small share of ownership. Dividend tax on foreign shares: Refers to the tax applicable to the dividend paid by a foreign company to an individual and considered foreign dividend income.
Wealth tax: A tax levied on the net wealth of an individual and levied annually. The net worth of assets is estimated at the maximum rate of taxation applicable.
Exit tax: Also known as expatriation tax, it is applied normally when an individual stops being a tax resident in countries with a residential system of taxation, or forfeits his citizenship in countries with a citizenship base of taxation. In many cases, unrealized capital gains are taxed when one exits the jurisdiction, but in many cases they can be deferred until the assets are sold.
Special tax regime: Certain countries have a special tax regime shielding wealthy individuals from excessive taxation. Whether it is by forfeiting a lump sum or tax on remittance, these schemes can be favorable to the taxpayer.
China tax treaty: If the country has signed a tax treaty with China, it permits avoiding double taxation of foreign income.