Palau Tax Rates
Palau (Republic of Palau) uses the United States Dollar as its official currency and operates a relatively simple tax system. As a Compact of Free Association state with the United States, Palau's economy relies significantly on US financial assistance, tourism, and fishing. The country levies a progressive wage tax, a gross revenue tax on businesses, and a Palau Goods and Services Tax (PGST). There is no corporate income tax in the traditional sense — businesses are taxed on gross revenue rather than net profits.
Top Income Tax Rate
12%
Corporate Tax Rate
4%
VAT / Sales Tax
10%
Capital Gains Tax
0%
Detailed Tax Information
Income Tax Brackets
Palau imposes a wage tax on employment income. The first USD 8,000 of gross wages is taxed at 6%, and wages exceeding USD 8,000 are taxed at 12%. There is no tax-free threshold. The tax applies to all wages, salaries, and compensation earned in Palau. Employers are required to withhold the tax from employee wages.
| Income Range | Tax Rate |
|---|---|
| $0 – $8K | 6% |
| $8K+ | 12% |
Corporate Tax
Palau does not have a traditional corporate income tax based on net profits. Instead, businesses are subject to a Gross Revenue Tax (GRT) of 4% on gross revenue. This tax applies to all businesses operating in Palau regardless of profitability. The GRT is simpler to administer than a traditional corporate income tax as it does not require calculation of deductions or net profit.
Standard Rate
4%
Capital Gains Tax
Palau does not impose a capital gains tax. Gains from the sale of property, investments, or other capital assets are not subject to tax.
Rate
0%
VAT / Sales Tax
Palau introduced the Palau Goods and Services Tax (PGST) at a rate of 10% on most goods and services. The PGST replaced the previous hotel room tax and other consumption taxes. Exports are zero-rated. The PGST is designed to broaden the tax base and reduce reliance on US Compact funding.
Standard Rate
10%
Cryptocurrency Tax
Palau does not have specific legislation on cryptocurrency taxation. The country has shown interest in digital currency innovation, including exploring a national digital currency. Any income from crypto activities could theoretically be subject to gross revenue tax if conducted as a business.
Tax Treaties
Palau does not have any double taxation agreements. The country's tax relationship with the United States is governed primarily through the Compact of Free Association. Palau's simple tax system (gross revenue-based) reduces the complexity of cross-border tax issues.
Treaty Network
0
Double taxation agreements
Key Details
Relocate to Palau
See how much you could save by moving here from your current country.
+$7K
Tax in United States
$24K
24.4% effective
Tax in Palau
$18K
17.5% effective
You Save
28.1%
less tax annually
US Citizens: Important Note
US citizens are taxed on worldwide income regardless of residence. You'll still need to file US taxes, though the Foreign Earned Income Exclusion and Foreign Tax Credit may reduce your liability.
