Timor-Leste residents are taxable on a worldwide income basis, while non-residents are taxable only on the income sourced from Timor-Leste. Residents earning foreign-sourced income may receive a foreign tax credit (see the Foreign tax relief and tax treaties section).
Timor-Leste individual taxpayers are subject to income tax on their taxable income, which is essentially the difference between gross income (other than from employment, see Wage Income Tax [WIT] below) and allowable deductions.
Personal income tax rates
The income tax rates applicable for a resident individual taxpayer are as follows:
|Annual taxable income (USD*)||Income tax rate (%)|
* United States dollars
The income tax rate for taxable income earned by a non-resident individual is 10% (flat rate) for all Timor-Leste sourced taxable income.
Wage Income Tax (WIT)
WIT is imposed on taxable wages received by an employee in Timor-Leste who is in employment in Timor-Leste. Employment in Timor-Leste is described as services performed in Timor-Leste or performed by an employee of the government of Timor-Leste, irrespective of where the services take place.
The WIT rates are as follows:
|Annual taxable income (USD)||WIT rate (%)|
Wages paid to employees who are non-residents of Timor-Leste are taxed at a flat rate of 10% (i.e. with no tax-free threshold). Wages are taxable whether provided in a cash or non-cash form.
Wages exempt from WIT are as follows:
- Wages received for official duties that are exempt from taxation under the Law.
- Wages of an employee who is a citizen of a foreign country received in the employee’s capacity as a government employee of a foreign country, provided the wages are subject to income tax in that country.
- Wages of an employee who is an employee of the United Nations or its specialised agencies.
- Wages received by an individual that are financed from the Trust Fund for East Timor.
An employer paying taxable wages shall withhold WIT from those wages, using the tax rates as provided, and remit the WIT on a monthly basis.
If an employee receives wages that have been correctly subject to WIT, then no further WIT or income tax liability exists with respect to those wages.
An annual WIT return is due by the last day of the February following the end of the relevant tax year. Information on WIT withheld must also be provided to each employee on an annual basis or on termination of employment.