Timor-Leste, a small yet strategically located nation in Southeast Asia, offers a unique and investor-friendly tax environment. With one of the lowest corporate tax rates globally, Timor-Leste presents an appealing opportunity for businesses looking to establish a presence in the region.

Corporate and Personal Taxes

Corporate Income Tax: Timor-Leste imposes a corporate income tax rate of just 10%, placing it among the twenty countries with the lowest corporate income tax rates in the world. This low rate is a significant advantage for businesses aiming to maximize profitability while minimizing tax liabilities.

Personal Income Tax: The personal income tax in Timor-Leste is progressive, with rates ranging from 0% to 10%. This means that individuals are taxed based on their income levels, ensuring a fair and equitable system.

Wage Income Tax: Similar to personal income tax, wage income tax also follows a progressive structure, ranging from 0% to 10%. This system helps maintain balance, especially for workers across different income brackets.

Other Tax Liabilities

Withholding Tax: The withholding tax in Timor-Leste varies between 2% and 10%, depending on the nature of the payment. This tax is typically applied to dividends, interest, and other types of income.

Sales Tax: Unlike many other countries, Timor-Leste does not currently implement a Value Added Tax (VAT). Instead, it levies a modest 2.5% sales tax on imported taxable goods. Notably, goods and services sold and delivered within Timor-Leste are subject to a 0% sales tax rate, making the domestic market particularly attractive.

Service Tax: A 5% service tax is applied to specific sectors, including hospitality services, restaurants, bars, and telecommunications, provided the monthly turnover exceeds US$500.

Customs Duties on Imports: Timor-Leste imposes a 2.5% customs duty on the value of imported goods, which is relatively low compared to international standards.

Strategic Advantages

The tax regime in Timor-Leste is designed to attract both foreign and domestic investments by maintaining low tax rates and minimizing the tax burden on businesses. The absence of VAT and the low sales and customs duties further enhance the attractiveness of the country's business environment.

For investors seeking to explore opportunities in Timor-Leste, understanding the taxation system is crucial. The low tax rates, combined with the simplicity of the tax structure, make Timor-Leste a competitive option for establishing and growing a business in Southeast Asia.

For details on East Timor taxation system, tax filling and settlement system, download TradeInvest's factsheet:

  Factsheet Corporate Taxation
 Factsheet Personal Taxation