Australia and the World Past and Present

The Gulf states are low-tax jurisdictions.

Well, unless you are an oil company.

Oil has allowed the Gulf states to have very low tax thresholds for income tax or corporate tax.

In the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain and Oman, the personal income tax rate is 0%.

Corporate income tax rates are normally higher.

Only Bahrain has it sitting at 0%.

In the UAE it is 9%.

It is 10% in Qatar.

15% in Kuwait and Oman.

Saudi Arabia tops the list at 20%.

Gulf states often have a value added tax (VAT), usually sitting at around 5%. Saudi Arabia’s VAT is at the higher end of the spectrum (15%).

So, salaries are usually tax free.

And these rates tend to apply whether one is a citizen or simply a resident.

So, how can a country like Bahrain, with a personal income tax rate and a corporate tax rate of 0% have any revenue streams? It has to get its money from somewhere, right? Otherwise it wouldn’t be able to build roads or schools or hospitals.

In Bahrain, oil and gas companies are heavily taxed and bring in about 50-60% of government revenue. The VAT is 10%. There are also customs duties, government fees and charges (i.e. for residency permits and business licences).

These competitive tax rates simply wouldn’t be possible without the region’s resource wealth. Profits from oil and gas extraction essentially subsidises a competitive taxation structure.