If you have the option to live anywhere in the world, understanding potential income taxes before relocating and comparing them to U.S. tax rates would be important. However, it’s not the sole consideration. Factors like your filing status (single or married) also play a role in determining which locations might have higher income taxes. Additionally, countries with the highest taxes on high-income earners may differ from those with the highest taxes on average income earners.
Marital status and having children can further impact tax implications. For instance, Denmark has high taxes for both single and married taxpayers, but the other top four countries in each category are entirely different, albeit all situated in Europe. This article focuses on the taxes you can expect based on whether you are single or married. The data, from the most recent available records in 2019, is sourced from the Organisation for Economic Co-operation and Development (OECD), which is a platform for 37 advanced and developing countries (25 of which are in Europe) to collaborate on promoting people’s economic and social well-being.
Countries With the Highest Income Tax for Single People
Let’s look at the countries with the highest all-in average personal income tax rates at the average wage for a single person with no children. The top five are Germany (38.9%), Belgium (38.4%), Lithuania (35.8%), Denmark (35.3%), and Slovenia (33.7%).
Germany
In Germany, the tax system is progressive, meaning that individuals with higher incomes pay higher tax rates compared to those with lower incomes. The country imposes a progressive income and capital tax, with the highest rate capped at 45%. Various sources of income are subject to taxation, including earnings from agriculture, forestry, business ownership, self-employment, employment, savings and investments, rental property, capital gains, and other forms of income.
The first €801 of savings and investment income is not taxed, thanks to the saver’s allowance. Additionally, there are withholding taxes of 25% on interest and dividends and 15% on royalties.
Regarding church taxes, they are fully deductible in Germany. Individuals can also deduct charitable contributions, as long as they do not exceed 20% of their adjusted gross income (AGI). Similar church taxes are imposed in many other European countries.
An income of up to €9,744 is considered a personal allowance and is not subject to taxation. Moreover, other deductions are available, including contributions to a statutory pension insurance plan, health insurance premiums, private accident, life, unemployment, and disability insurance premiums, donations to registered charities, and up to €6,000 per year in training expenses for future professions.
Belgium
In Belgium, the top progressive tax rate is 50%. Various sources of income, including earnings from property, work, investments, and miscellaneous sources, are subject to taxation. The capital gains tax rates vary depending on the type of capital involved.
Employees are required to pay a social security tax of 13.07% of their income. The government allows deductions for business expenses, social contributions, and 80% of alimony payments. Additionally, there is a personal allowance based on the individual’s filing status. For the year 2023, the personal allowance is set at €9,270.
Expats in Belgium experienced changes in their tax rules in January 2022. They must have a minimum Adjusted Gross Income (AGI) of €75,000. The government allows for a maximum of 30% of the AGI as a tax-free allowance for expats. This program is valid for five years with the possibility of being extended.
Lithuania
In Lithuania, income earners are taxed at rates that reach a maximum of 32% for earnings over €90,246. Personal income tax up to that Adjusted Gross Income (AGI) is levied at 20%. Taxable income includes various sources, such as employment, commercial activities, royalties, leasing assets, and other forms of income.
Income not related to employment, such as royalties, interest, and gains from the sale of property, is subject to a tax rate of either 15% or 20%, depending on the specific type. Capital gains are also taxed at either 15% or 20%. Dividends, on the other hand, incur a tax rate of 15%. For interest income, there is no withholding tax charged unless the individual is not a citizen of Lithuania, in which case the rate is 15%.
Lithuania has provided significant tax benefits to certain earners, as the top income tax bracket has been increased significantly. As of 2022, the threshold for this bracket is €90,246, compared to €81,162 in 2021. Additionally, all earnings above this amount are subject to a lower social security tax rate of 6.98%.
Denmark
In Denmark, the progressive income tax reaches a maximum rate of 55.9%. Danes are also subject to an 8% Danish labor market contribution tax, an 8% healthcare tax, an average of 24.98% in municipal taxes, and social security taxes amounting to 1,135.8 kr. ($167.06) per year. Capital gains taxes are aligned with the normal personal income tax rate, and there is an inheritance and gift tax rate of 15%.
Various sources of income are taxable, including employment income, bonuses, fringe benefits, business income, fees, pensions, annuities, social security benefits, dividends, interest, capital gains, and real estate rental income. Additionally, there is a voluntary church tax of 0.70%.
Tax deductions are available for specific contributions to approved Danish pensions, unemployment insurance, interest on debt, charitable contributions, unreimbursed work travel, and double households.
Denmark has an expat scheme, but it still requires payment of the labor tax. For individuals who meet the special expat requirements, the tax rate under this scheme is 32.84%.
Slovenia
In Slovenia, individuals are subject to an income tax ranging from 16% to 45%. Residents are taxed on their worldwide income, while non-residents are taxed only on their Slovenia-sourced income. There are six types of income that are subject to taxation: employment, business, agriculture and forestry, rent and royalties, dividends, interest, and capital gains, and “other.”
For rental income in 2022, a withholding tax of 15% is levied. This rate was nearly double, at 27.5%, in 2021.
Regarding insurance, the employee bears the majority of the burden for pension and disability insurance at 15.50%. Health insurance costs are divided relatively equally between the employer and employee, with each contributing 6.36%. Social security as a whole in Slovenia amounts to 22.10%.
Capital gains, interest, and dividends are taxed at a flat rate of 25%. However, tax residents have the option to choose between this flat rate or the progressive tax rates.
How the U.S. Compares
Among average-earning singles with no children, the United States has a personal income tax rate of 24.4%, ranking it 22nd highest among the countries surveyed. On the other hand, countries with the lowest all-in average personal income tax rates for single individuals with no children include Chile (7%), Mexico (10.8%), and Korea (15%).
Countries With the Highest Income Tax for Married People
For one-earner married families with two children, the countries with the highest average personal income taxes differ from the single-with-no-children category. In this category, Lithuania (35.8%) and Denmark (31.4%) remain in the top five. Joining them are Finland (30.2%), the Netherlands (27.7%), and Norway (27.5%).
Lithuania
In addition to the details mentioned in the “Taxes for Single People” section above, here is some further information about taxation in Lithuania.
Residents in Lithuania are subject to taxation on their worldwide income, whereas non-residents are taxed on their income sourced from Lithuania and activities conducted through a fixed base in Lithuania. Lithuanian residents are entitled to an annual tax-exempt amount of up to €4,800, which gradually decreases as their income increases. The tax-exempt amount is calculated based on the initial amount minus 0.18 times the difference between the annual income and twelve monthly minimum wages of the current calendar year.
Moreover, consumers in Lithuania also pay value-added taxes (VAT) on most goods and services at a standard rate of 21%.
Turkey
Turkey’s income tax rates have a range from 15% to 35%. The country imposes income tax on various sources of income, including commercial, agricultural, and professional activities, salaries, wages, income from immovable property, dividends, interest, royalties, and other sources, which includes capital gains. Taxpayers in Turkey can claim deductions for expenses related to medical and educational purposes, pension and private health insurance expenses, as well as specific charitable donations.
Denmark
In addition to the information on Denmark’s tax rates mentioned earlier, here are further details about taxation in Denmark. Residents are required to pay taxes on their worldwide income, and spouses must file separate tax returns. Generally, capital gains from the sale of a home are exempt from taxes. Most taxpayers receive a personal allowance amounting to 46,200 kr. ($6,802.22) and an employment allowance. Individuals are subject to property taxes, and anyone other than a spouse who inherits property is liable to pay inheritance tax. Furthermore, consumers are charged value-added taxes (VAT) on most goods and services at a rate of 25%.
Finland
In Finland, income earners are subject to progressive tax rates, with the highest rate reaching 31.25%. Individuals are also required to pay social insurance contributions and a public broadcasting tax. The country imposes income tax on various sources, including salaries, wages, pensions, social benefits, and capital income from investments. Earned income is taxed at the national, municipal, and church levels.
Netherlands
- In the Netherlands, income is classified into three categories:
- salaries, wages, benefits in kind, pensions, and homeownership income;
- enterprise income from substantial business holdings;
- savings and investment income. Each category has its specific deductions and tax rates, and general tax credits are applied to the net income after combining the three categories. Income is subject to progressive tax rates ranging from 37.35% to 49.5%, and these rates include social security taxes. Married couples typically file joint tax returns, unless they are in the process of divorce, and some unmarried couples may also be required to file jointly.
U.S. Tax Rate for Married Couples
Among OECD countries, the United States ranks 31st with an all-in average personal income tax rate of 12.6% for married single-earner couples with two children. The countries with the lowest income tax rates for this category are the Czech Republic (6.5%), Chile (7%), and Switzerland (10.7%). There is a significant disparity between the highest and lowest income tax burdens among these countries within the OECD.
The Bottom Line
Income tax burdens vary significantly from country to country due to the varying rates at which each country funds social insurance programs, such as old-age pensions and healthcare. Some countries, like the Netherlands, impose higher social insurance taxes compared to basic income taxes.
Each country offers different levels of benefits to its citizens, and individuals receive different returns on the amounts they contribute to social insurance programs based on personal factors such as income, age, and health status.
Different countries use various tax brackets to classify taxpayers based on their income level, marital status, and number of dependents. Simply knowing a country’s overall income tax rate does not provide a complete picture of how an individual would be affected by the tax system, as it depends on the unique circumstances that apply to their specific situation.
