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How Take-Home Income Compares Internationally

Summary

A new study reveals that a country’s practical tax rate can range from 0% to 56% when looking at each one’s median salary.

Those with the highest and lowest rates, respectively, are Denmark (56%) and Saudi Arabia (0%).

The practical tax rate in the U.S. is 18%, lower than most of the countries analyzed.

Living internationally is no longer just something of your dreams. It’s a possibility for most Americans, regardless of industry, and a reality for some. The number of people working abroad is on the rise and will likely only continue along this trend. Multinational companies are a fixture in the international economy at this point, which provides a slew of unique opportunities to U.S. employees.

Still, it’s not as glamorous as some may think. It’s important to consider the tax implications because there may actually be some financial downsides depending on the country. So, how does the global income landscape look?

A new study from CapRelo on international pay reveals the key numbers any potential expat worker needs. First, it looked at the median salary of each country in U.S. dollars and calculated the take-home equivalent of each after local tax. The variance in practical tax rates among countries becomes apparent when looking at the numbers this way. For one, Switzerland’s average salary only loses $1,712 USD in taxes, bringing the median take-home pay to a comfortable $84,006 USD. This likely is due to the fact that the country doesn’t have a nationwide social security system in place. Denmark, on the other hand, loses $36,083 USD in taxes from its median salary of $64,310 USD. This country has a much more extensive social benefit system than others on the list.



Visualizing the practical tax rates globally illustrates how neighboring countries tend to follow similar trends. In Europe, for instance, many countries have relatively higher rates. Some of the highest in the region are associated with Denmark (56%), Sweden (52%), and Belgium (45%). The lowest worldwide are Saudi Arabia (0%), Switzerland (2%), Bulgaria (10%), and Romania (10%).



The report also calculated the taxes that would be assessed on the median U.S. salary in each country. The United States, itself, ranks on the low end at a practical tax rate of 18%. Only 10 countries have lower rates than that, many of which have established government systems. In other words, these 10 aren’t simply countries with developing infrastructures. Interestingly, China’s practical rate jumps from 12% to 36% when looking at the median U.S. salary rather than the median salary in China.



This study shows both how much each country varies in income tax, but also illustrates how much the rate can vary within each country depending on a person’s salary. The latter is especially apparent when comparing the practical rate in China that jumps from 12% to 36% depending on one’s income. All this to say — the wage you will earn overseas is just as important as the country, itself, when considering if an international position is for you.