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RCG TAXATION INDEX 2021 BY CITY

The 2021 RCG Taxation Index ranks the tax-friendliness of more than 180 world cities. Tax-friendliness is defined by the degree of taxation at the personal and corporate levels. Cities ranking at the top are free of tax or levy very little tax. Tax rates are often uniform countrywide but can vary from one city to another. The Taxation Index takes the perspective of high-income individuals since tax rates are often compared to the highest bracket. 

The amount of wealth one possesses will usually make a significant difference in his tax liability. Many different factors are weighted in the index, such as wealth tax, social security, and inheritance tax. It’s clear 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 for both. Furthermore, tax planning can have a significant effect on a person’s tax burden. In some cases, you might be able to significantly lower your tax liability even if you live in a heavily taxed country.

Table below provides reliable data and information on business tax rates and incentives, enabling companies to make decisions on where to invest and grow their business.

International Tax Competitiveness Index

METHODOLOGY

All the data were collected in January 2021. The information represents the rates for the taxation year 2021. All rates apply to a tax resident.

Source is based on the 3 common types of taxation system. Territorial base means tax is levied strictly on local income. Residential base means it is levied on the worldwide income of its residents. Citizenship base means tax is levied on the worldwide income of citizens. Usually, the taxation system will define income as local or foreign.

Tax residence indicates the conditions upon which an individual can be considered a tax resident.

Income tax on 100K refers to the personal income tax rate imposed on a jointly filed annual salary of 100,000 USD. It assumes that no deductions were used to reduce the tax rate. For countries that levy incremental tax, the exemption and social security deductions were calculated. Certain jurisdictions levy tax at different levels: federal, regional, and municipal.

Income tax $1M follows the same methodology used for $100,000, but the tax rate applies to a jointly filed annual salary of 1,000,000 USD.

Corporate tax applies to large businesses. It’s a tax on profit unless otherwise stipulated (see notes). Corporate rates vary depending on the industry. We selected the highest tax rate in the case of the incremental tax rate. Certain jurisdictions levy corporate taxes at multiple levels:  federal, regional, and municipal.

General Sales Tax, also known as Consumption Tax or Value-Added Tax (VAT), is levied on the sale of general goods and services. Certain products like alcohol and cigarettes generally have higher sales tax rates and food has lower rates. Certain jurisdictions can levy tax at the federal, regional, and municipal levels.

Social Security Total reflects the total charges paid by employer and employee on wages for social security. The rates are often capped and can vary based on profession, age, and income. The rate can comprise various benefits like pension, health care, unemployment, etc.

Inheritance tax (children) is the tax levied on the estate through the inheritance by the children (linear) of the deceased. The rate reflects the rate on the inheritance of a real estate property and is estimated at the maximum rate. Some jurisdictions might not levy an inheritance tax, but instead 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 3 years of having held the shares. The rate varies depending on the percentage of ownership in the company. Our listed rate is for a small share of ownership.

Dividend tax on local publicly traded shares refers to the tax rate on dividends collected by individuals from publicly traded companies on the local stock exchange. Our listed rate is for a small share of ownership.

Dividend tax on foreign shares refers to the tax applicable to dividends paid by a foreign company to an individual. The dividends are considered as foreign income.

Wealth tax is levied annually on an individual’s net wealth. The net worth of the assets is estimated at the maximum rate of taxation applicable.

Exit tax, also known as expatriation tax, is applied normally when an individual breaks his tax residence in a country. 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. In certain countries, wealthy individuals are shielded from excessive taxation. Whether it is by forfeiting a lump sum or non-domiciled taxation, these schemes can be favorable to the taxpayer.

China tax treaty establishes whether the country has signed a tax treaty with China. This allows you to avoid double taxation on foreign income if you are a Chinese national.

Source:

The vast majority of the tax rates were taken from official governmental sources, usually the tax department or the finance ministry website. Many tax rates are combinations of more than one source as rates can be levied at the federal, regional, and municipal levels. Some government websites were very poorly referenced and the information was not accessible online. In those cases, we used the very comprehensive Tax Summaries by PWC.

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