Countries with the Highest Single and Family Income Tax Rates

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Countries with the Highest Single and Family Income Tax Rates

If you could reside anyplace in the globe, wouldn’t you want to know about the prospective income taxes and how they compare to the tax rates in the United States? Perhaps, but it isn’t the only question. Your filing status, whether single or married, also plays a role in deciding which areas may have the highest income taxes. Furthermore, the nations with the highest taxes on high incomes—Slovenia, Belgium, Sweden, Finland, and Portugal—are largely distinct from those with the highest taxes on middle-income workers.

Being married and having children may also make a difference. Denmark has some of the world’s highest taxes on both single and married taxpayers, but the other top four nations in each of the two categories are quite different, despite the fact that they are all in Europe.

This page discusses the taxes you may face based on whether you are single or married. This data (the most current available in 2019) is from the Organisation for Economic Co-operation and Development (OECD), a forum that enables governments from 37 advanced and developing nations throughout the globe, 25 of which are in Europe, to collaborate on economic and social well-being.

Key Takeaways

  • Income tax loads differ by nation and are determined by how much is paid into social insurance systems, as well as other factors such as age and homeownership status.
  • There is a gap between the highest and lowest income tax loads among OECD nations, with Europe dominating the list.
  • Different nations additionally categorize taxpayers depending on their income level, marital status, and number of dependents.
  • Many European nations provide tax breaks to expats who live in their country.
  • Most nations have a double taxation treaty with the United States, which ensures that certain kinds of income are not taxed twice.

Countries With the Highest Income Tax for Single People

Consider the nations with the highest all-in average personal income tax rates based on the average pay for a single individual with no children. Germany (38.9%), Belgium (38.4%), Lithuania (35.8%), Denmark (35.3%), and Slovenia (33.7%) are the top five.

1. Germany

Germany has a progressive tax system, which implies that higher-income people pay more taxes than lower-income people. The government charges a progressive income and capital tax with a 45% top rate. Agriculture, forestry, company ownership, self-employment, employment, savings and investments, rental property, capital gains, and other income are all sources of taxable income. The saver’s allowance means that the first €801 in savings and investment income is not taxed. Interest and dividends are subject to a 25% withholding tax, whereas royalties are subject to a 15% withholding tax.

Church tax in Germany is entirely deductible, and charitable donations may be deducted as long as they are less than 20% of an individual’s adjusted gross income (AGI).Many other European nations levy church levies.

A personal allowance of up to €9,744 is considered and is not taxed. Other deductions include a proportion of payments to a statutory pension insurance plan, health insurance premiums, private accident, life, unemployment, and disability insurance premiums, gifts to registered charities, and up to €6,000 per year in professional training.

2. Belgium

The highest progressive tax rate in Belgium is 50%. Property, labour, investments, and other sources of income are all taxed. The capital gains tax rate is determined on the kind of capital.

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Employees pay a 13.07% social security tax on their earnings. The government enables company expenditures, social contributions, and 80% of alimony payments to be deducted, as well as a personal allowance depending on filing status. The allocation for 2023 is €9,270.

Expats in Belgium will be subject to new laws beginning in January 2022. They must have an AGI of at least €75,000. The government provides you a tax-free allowance of up to 30% of AGI. It is a five-year program with the possibility of extension.

3. Lithuania

Lithuania taxes its income earners at rates that reach 32% for incomes above €90,246. Personal income tax is levied until the AGI reaches 20%. Employment, commercial operations, royalties, leasing assets, and “other” are all examples of taxable income.

Unemployment income, including royalties, interest, and profits from the sale of property, is taxed at a 15% or 20% rate, as are capital gains. Dividends are taxed at a rate of 15%. There is no withholding tax on interest unless the person is not a Lithuanian citizen, in which case the rate is 15%.

Lithuania seems to have handed a significant tax benefit to high taxpayers, since the top income tax level was lifted significantly. That barrier will be €90,246 beginning in 2022. It was €81,162 in 2021. All earnings in excess of this level are subject to a 6.98% social security tax.

4. Denmark

Denmark’s progressive income tax reaches a maximum of 55.9%. Danes pay an 8% Danish labor market contribution tax, an 8% healthcare tax, an average of 24.98% in municipal taxes, social security taxes of 1,135.8 kr ($167.06) per year, and capital gains taxes that are tied to the standard personal income tax rate. There is a 15% inheritance and gift tax rate.

All employment income, bonuses, fringe benefits, company income, fees, pensions, annuities, social security payments, dividends, interest, capital gains, and rental income from real estate are taxed. There is also a 0.70% optional church tax.

Donations to recognized 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, but since it still involves payment of labor tax, the rate for those who fulfill the specific expat conditions is 32.84%.

5. Slovenia

Individual income taxes in Slovenia vary from 16% to 45%. Residents are taxed on their global income, whilst non-residents are solely taxed on their income earned in Slovenia. Employment, business, agriculture and forestry, rent and royalties, dividends, interest, and capital gains, and “other” income are all taxed. For 2022, a 15% withholding tax is applied on rental income. By 2021, the figure had almost doubled to 27.5%.

At 15.50%, the employee pays the lion’s share of pension and disability insurance. At 6.36%, health insurance coverage is approximately equal between employer and employee. Slovenia’s overall social security coverage is 22.10%.

Capital gains, interest, and dividends are all subject to a 25% flat tax. Tax residents, on the other hand, have the option of choosing between the flat rate and the progressive tax rates.

How the U.S. Compares

The United States ranks 22nd in this category of average-earning individuals with no children, with a tax rate of 24.4%. Chile (7%), Mexico (10.8%), and Korea (15%) have the lowest all-in average personal income tax rates on single adults without children.

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If you get a lot of social insurance benefits, have a good quality of living, and believe the government spends your tax funds properly, you may consider a country’s high taxes to be a worthwhile trade-off.

Countries With the Highest Income Tax for Married People

The nations with the highest average personal income taxes vary for one-earner married households with two children. Lithuania (35.8%) and Denmark (31.4%) rank first and second in both this and the single-without-children categories. Finland (30.2%), the Netherlands (27.7%), and Norway (27.5%) are all in the top five, among Lithuania and Denmark.

1. Lithuania

In addition to the specifics in the taxes for single individuals section above, below is additional information concerning taxation in Lithuania. Residents are taxed on their global income, whilst non-residents are taxed on their Lithuanian-sourced income as well as revenue from operations carried out via a fixed basis in Lithuania. Residents of Lithuania are allowed an annual tax-free sum of up to €4,800, which decreases as their pay increases and is based on that amount minus 0.18x, where x is the yearly income minus the current calendar year’s twelve monthly minimum salaries. Consumers must additionally pay 21% VAT on the majority of products and services.

2. Turkey

The income tax rates in Turkey vary from 15% to 35%. Turkey taxes commercial, agricultural, and professional operations, as well as salaries and wages, revenue from immovable property, dividends, interest, and royalties, and other income, including capital gains. Medical and educational expenditures, pension and private health insurance expenses, and some gifts are all tax deductible.

3. Denmark

Because we discussed Denmark’s tax rates in the last section, here is some extra information about Danish taxes. Residents must file individually and pay taxes on their international income. Capital gains on the sale of a house are typically tax-free. The majority of taxpayers get a personal allowance of 46,200 kr ($6,802.22) and an employment allowance. Individuals pay property taxes, and anybody who gets an inheritance other than a spouse must pay an inheritance tax. Consumers must additionally pay a 25% value-added tax on most products and services.

4. Finland

Finland taxes its citizens at progressive rates that reach 31.25%. Individuals pay social insurance payments as well as a levy on public broadcasting. Finland taxes salaries, wages, pensions, and social benefits, as well as capital gains from investments. Earned income is subject to federal, state, and local taxes, as well as church levies.

5. The Netherlands

All income in the Netherlands is classified into three types: 1) salary, wages, benefits in kind, pensions, and homeownership income; 2) enterprise revenue from major company holdings; and 3) savings and investment income. Each category has its own set of deductions and tax rates, and general tax credits are applied to net income when the three categories are added together. Income is taxed at graduated rates ranging from 37.35 to 49.5%. These rates include social security taxes. Unless they have filed for divorce, married couples must file together, and certain unmarried couples must also file jointly.

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U.S. Tax Rate for Married Couples

In this area, the United States ranks 31st, with a tax rate of 12.6%. The Czech Republic (6.5%), Chile (7%), and Switzerland (10.7%) have the lowest all-in average personal income tax rates for married single-earner couples with two children. The OECD nations with the highest and lowest income tax loads have a significant gap.

Germany, Belgium, Lithuania, Denmark, and Slovenia have the highest income taxes for singles, whereas the highest income taxes for married couples with two children are in Lithuania (again), Norway, Denmark (again), Finland, and the Netherlands.

What Countries Have the Lowest Personal Income Taxes?

Chile has the lowest all-in income taxes for single filers without children, at 7%, Mexico at 10.8%, Korea at 15%, Estonia at 15.6%, and Switzerland at 17.1%. The five countries with the highest income taxes are Israel, New Zealand, Spain, Japan, and Canada.

What Is a Tax Haven Country?

A tax haven nation is one in which an employee or, more typically, a company owner may reduce or avoid paying taxes entirely. This is exceedingly difficult to do if you are a paid employee, but people who own a company and pay themselves via dividends or a salary from that firm, and who are able to register that business in a tax haven, may be able to legally avoid their tax responsibility. The British Virgin Islands, Bermuda, Guam, Taiwan, and Jersey are all popular tax havens. If you are contemplating this technique, you should consult with a cross-border CPA to verify that everything is done lawfully.

What Are the Double Taxation Rules?

Double taxation is something that should be avoided if at all feasible. It entails paying taxes on the same source of income twice. This is common when someone earns money from a variety of sources, generally from abroad. This can happen with a 401(k), as well as other tax-advantaged accounts like individual retirement accounts (IRAs), and, as many US business owners are aware, income from a limited liability company (LLC) may be taxed twice because some foreign governments, such as Canada, do not recognize the business structure.

The Bottom Line

Because of the rates at which each nation finances social insurance programs such as old-age pensions and healthcare, income tax loads vary greatly across country. Social insurance taxes are much higher than basic income taxes in certain countries, such as the Netherlands.

Each nation offers varying amounts of benefits to its residents, and individuals get varying returns on contributions to social insurance schemes depending on personal criteria such as income, age, and health condition.

Different nations categorize taxpayers depending on their income level, marital status, and the number of dependents. Simply because a nation has a particularly high or low total income tax rate does not tell you anything about how you would perform in that country given all of the elements that comprise your individual position.

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