Other Significant Taxes
TAXATION SYSTEM
Beyond Corporate Income Tax, businesses and individuals in Timor-Leste are subject to several other taxes.
Beyond Corporate Income Tax, businesses and individuals in Timor-Leste are subject to several other taxes:
Sales Tax:
A rate of 2.5% is applied to taxable goods imported into Timor-Leste.
A 0% rate applies to the sale of taxable goods and the provision of taxable services within Timor-Leste. This distinction is important for businesses involved in import and domestic sales.
Import Duty (Customs Duty): Calculated at a rate of 5% of the value of imported goods. This duty is a key component of the cost for businesses that rely on imported raw materials or finished products.
Withholding Tax (WHT): A 10% withholding tax is applied to income paid to non-residents who do not have a permanent establishment (PE) in Timor-Leste. This includes various types of income such as interest, royalties, and service fees paid to foreign entities.
Wage Income Tax: This tax applies to income earned by employees. For residents of Timor-Leste, wage income tax is applied at a progressive rate ranging from 0% to 10%. For non-resident employees, wages are taxed at a flat rate of 10% of the total monthly salary, with no tax-free threshold.
Tax Incentives: To further encourage investment, the government offers various tax incentives, particularly for businesses that contribute to priority sectors such as agriculture, tourism, and infrastructure. These incentives may include reduced corporate tax rates, tax holidays, or exemptions from certain duties. Investors are advised to consult with TradeInvest Timor-Leste and local tax advisors to understand the specific eligibility criteria and benefits of these incentives.