Which Countries Have High Taxes on High Incomes?

5 Countries With High-Income Tax Rates

Countries such as Belgium, Finland, Portugal, and Slovenia have the highest income tax rates for high-income individuals, with rates reaching at least 57%. In contrast, the United States ranks 22nd with a combined all-in rate of 46%.

Key Takeaways

• High tax rates on the wealthy are believed to help redistribute income, ensuring access to essential services like housing and healthcare.
• Critics argue these rates may discourages the wealthy from working and investing as much.
• Belgium has one of the highest rates at 60.2%.
• The U.S. stands at 22nd place with a 46% rate.

Why Is This Important?

High tax rates on wealthy individuals can significantly impact their decisions regarding where to live, work, and invest. Supporters of high taxes argue they promote quality and social welfare, while opponents claim they stifle economic growth and innovation.

Regardless of which theory resonates with you, there’s no question that tax rates affect the wealthy’s decisions about where and how to live, work, and invest, including their activities in the countries with the top marginal tax rates on individuals.

The following rates include both personal income taxes and employee social security contributions, based on the latest Organization for Economic Co-operation and Development (OECD) data. We then analyze how various taxes are assessed on the wealthy in each country.

Belgium: 60.2%

For personal income taxes and employee social security contributions, Belgium’s all-in rate is 60.2%. Belgium levies both national and regional income taxes on its residents. Individuals pay taxes on movable and immovable property, and professional and miscellaneous income. The highest progressive tax rate is 53%, which may be increased further by communal surcharges of 0% to 9%. The social security tax rate on employees is 13.07% of gross income.

Individual capital gains from shares categorized as professional income are typically taxed at the ordinary individual income tax rate, but most capital gains from individuals not engaged in business activities are not taxed.

Belgium allows tax deductions for business expenses, social contributions, and alimony payments. The country also provides a personal allowance based on whether the taxpayer is single, has dependent children, and so on. Tax credits are available for charitable donations, certain life insurance policies, pension plan contributions, real estate investments, and other items.

Depending on the region, real estate acquisition is taxed at 10% or 12.5%, as well as annual property taxes. Inheritance taxes apply even to spouses, legal cohabitants, and descendants. The rate can be as high as 30% for these beneficiaries. Unrelated beneficiaries and distant relatives may pay as high as 80% of inheritance taxes. There is no net wealth or net worth tax.

Finland: 59.4%

For personal income taxes and employee social security contributions, Finland’s all-in rate is 59.4%. In Finland, the tax authorities fill out residents’ tax returns for them. The country categorizes all individual income in one of two ways:

• Earned income is subject to national, municipal, and social security taxes. It is also subject to church taxes for members of one of Finland’s two national churches. 
• National income tax has progressive tax rates as high as 51.26% where the first 18,600 euros is exempt from national income tax but not from municipal income, church, or social security tax.

Municipal taxes are also applied progressively and max out at 23.5%, and the church tax is 1% to 2.3%.

Important

A progressive tax system is based on an individual’s ability to pay. This means the higher your income, the higher your tax rate.

Income from taxed capital has two rates—30% on income up to 30,000 euros and 34% on income exceeding that amount. Transfers of Finnish securities incur a 1.6% tax. After deducting the pension income allowance, pension income exceeding 47,000 euros is subject to a 5.85% surtax. Finnish workers have withheld from their gross pay pension insurance contributions of 7.15%, plus 1.4% for unemployment insurance, and 1.36% for health insurance premiums.

Finland allows deductions to earned income for work-related expenses, such as commuting costs, professional literature, tools and equipment, and certain travel expenses. It also allows deductions to capital income, such as home mortgage interest.

Real property is taxed at 0.41% to 2.0% at the municipal level, depending on location and property type. There is also a 3% property transfer tax. There is no longer any inheritance tax in Portugal, but there is a fee that beneficiaries of inheritances have to pay called a stamp duty tax at a flat rate of 10%. There is no net wealth or net worth tax.

Portugal: 58.2% 

For personal income taxes and employee social security contributions, Portugal’s all-in rate is 58.2%. Portugal’s national government imposes progressive tax rates of up to 47.2% on employment, business, and professional income, while investment income, real estate income and increases in net worth and pensions at a flat rate of 28%.Employees contribute 11% of their income to social security. In 2016, Portugal levied an additional 3.5% tax on income exceeding the minimum wage.

Real estate is taxed at the municipal level, with property taxes and transfer taxes. However, if you sell your primary residence and reinvest the proceeds into another permanent residence in Portugal or another EU country, the gains are tax-exempt.

Portugal allows deductions for health and education expenses and offers personal tax credits based on the number of family members. While gifts and inheritances between spouses, descendants, and ancestors are exempt from taxes, other recipients are subject to a 10% stamp duty tax. Notably, Portugal does not levy a net wealth or net worth tax.

Slovenia: 57.2% 

For personal income taxes and employee social security contributions, Slovenia’s all-in rate is 57.2%. Slovenia’s national government taxes employment income, business income, income from basic agriculture and forestry, income from rents and royalties, income from capital (dividends), interest, and capital gains), and other income. The highest progressive tax rate is 45%. Employees pay social security taxes of 22.1% on gross income.

Income from capital, certain business activities, and rental property are taxed in separate buckets and at sometimes different rates from all other sources of income. Capital gains are taxed at 25%, but the longer the holding period, the lower the rate. After holding the investment for five years, the rate drops by 10%, then by another 5% for every five years thereafter. By holding an investment for 20 years, an individual can avoid paying capital gains tax on that investment altogether.

Slovenia provides an income tax allowance for individuals, with additional allowances for being disabled or having dependents. Property owners pay taxes in certain areas based on several factors. Slovenia levies inheritance and gift taxes at progressive rates based on the property’s worth and the recipient’s relationship with the deceased or the donor. There is no net wealth or net worth tax.

Top Tax Rates in Other OECD Countries

The top tax rates are quite high in a number of other OECD countries as well. Coming in with honorable mentions are:

• Japan (56.1%)
• France (55.6%)
• Denmark (55.5%)
• Austria (55%)
• Greece (53.6%)
• Canada (53.5%)

The United States is a distant 22 on the list, with a rate of 46%.

Why Do Some Countries Tax High-Income Individuals at Such High Rates?

High tax rates on wealthy individuals are often justified as a way to redistribute income and fund social programs, including healthcare, housing, and education. Supporters believe these taxes help promote greater social equity and quality of life. Critics, however, argue that such high taxes can discourage investment and economic growth.

Do High-Income Taxes Also Apply to Inherited Wealth in These Countries?

Yes, in some of the countries with high taxes, such as Belgium and Slovenia, inheritance and gift taxes can also be significant, with rates sometimes as high as 30% to 80% depending on the relationship between the donor and the recipient. However, some countries, like Portugal, have no inheritance tax rates or smaller one-time flat fees.

How Do Social Security Contributions Affect High-Income Tax Rates in These Countries?

Social security contributions are a significant part of the overall tax burden in many of these high-tax countries. For example, Belgium’s employee social security rate is 13.07%, while Finland’s is 7.15%, and Slovenia’s is 22.1%. These mandatory contributions are included in the all-in tax rates, making them even higher than the personal income tax rates alone.

The Bottom Line

For individuals who earn high incomes from working or investing in Portugal, Slovenia, Belgium or Finland, the tax rate percentage on income exceeding a certain threshold can reach into the high 50s and low 60s. Individual taxes on income and investments, plus mandatory contributions to social security, create these high rates.

In some countries and situations, the wealthy also pays significant taxes on real estate and inherited wealth. Depending on which economist or politician you ask, these high tax rates are either a significant help to the country as a whole or a hindrance to its economic progress.