Income tax rates by country

Read this section as the executive summary. Each row below collapses an entire tax code into the five variables that drive a hiring or contracting decision: top rate, tax-free band, social security on both sides, and how the country treats residents versus non-residents.

The IRS published inflation-adjusted brackets for tax year 2026 in Rev. Proc. 2025-32. Federal rates remain the seven-bracket structure (10% / 12% / 22% / 24% / 32% / 35% / 37%) introduced under the Tax Cuts and Jobs Act (TCJA), which is currently scheduled to sunset after 2025 unless extended by Congress.

Federal brackets (single filer, TY 2026)

• 10% — up to $11,925
• 12% — $11,926 to $48,475
• 22% — $48,476 to $103,350
• 24% — $103,351 to $197,300
• 32% — $197,301 to $250,525
• 35% — $250,526 to $626,350
• 37% — above $626,350

Standard deduction (2026): $15,000 single, $30,000 married filing jointly. Most states add their own income tax (0% in Texas/Florida/Washington; up to ~13.3% in California). FICA payroll tax adds 7.65% on employee (6.2% Social Security up to $176,100 wage base + 1.45% Medicare) plus a matching employer share.

The Canada Revenue Agency (CRA) indexes federal brackets to inflation annually. Provincial tax stacks on top — Ontario, Quebec, British Columbia, and Alberta each have their own slabs, so the same income can face very different all-in rates.

Federal brackets (TY 2026, projected)

• 15% — up to ~C$57,375
• 20.5% — C$57,376 to C$114,750
• 26% — C$114,751 to C$177,882
• 29% — C$177,883 to C$253,414
• 33% — above C$253,414

Basic Personal Amount (federal): ~C$16,129 — effectively zero-rated. CPP (Canada Pension Plan) contributions: 5.95% employee + 5.95% employer up to YMPE C$71,300, plus CPP2 of 4% above that to C$81,200. EI (employment insurance) adds 1.66% employee, 2.32% employer.

Combined federal + provincial top marginal rates reach 53.5% in Nova Scotia, 53.3% in Quebec, and ~48.0% in Alberta. CRA: Income Tax Rates and Indexation, 2026 update.

Mexico's personal income tax (ISR) is administered by Servicio de Administración Tributaria (SAT) under the Ley del ISR. The progressive table runs from 1.92% to 35%, with brackets indexed to inflation when the cumulative INPC change exceeds 10%.

Annual ISR brackets (2026, illustrative — confirm at SAT publication)

• 1.92% — up to MXN 8,952
• 6.40% — to MXN 75,984
• 10.88% — to MXN 133,536
• 16.00% — to MXN 155,229
• 17.92% — to MXN 185,852
• 21.36% — to MXN 374,837
• 23.52% — to MXN 590,795
• 30.00% — to MXN 1,127,926
• 32.00% — to MXN 1,503,902
• 34.00% — to MXN 4,511,707
• 35.00% — above MXN 4,511,707

Residents are taxed on worldwide income; non-residents only on Mexico-source income. Social security (IMSS) employee contribution is roughly 2-3% of salary; employer carries the bulk (~25-35%). Aguinaldo (Christmas bonus) is mandatory — minimum 15 days of salary.

Under the TRAIN Law (RA 10963) and CREATE adjustments effective January 2023 onward, the Bureau of Internal Revenue (BIR) applies a progressive scale with a generous zero-rate band.

Annual PIT brackets (2026)

• 0% — up to PHP 250,000
• 15% — over PHP 250,000 to PHP 400,000
• 20% — over PHP 400,000 to PHP 800,000
• 25% — over PHP 800,000 to PHP 2,000,000
• 30% — over PHP 2,000,000 to PHP 8,000,000
• 35% — over PHP 8,000,000

13th month pay up to PHP 90,000 is tax-exempt. SSS, PhilHealth, and Pag-IBIG contributions are deductible. Self-employed and professionals earning ≤ PHP 3M may elect the flat 8% gross-receipts option instead of graduated rates.

Vietnam's General Department of Taxation (GDT) applies a seven-bracket progressive scale to residents on worldwide employment income. Non-residents pay a flat 20% on Vietnam-source employment income.

Monthly taxable income brackets (resident)

• 5% — up to VND 5,000,000
• 10% — VND 5–10 million
• 15% — VND 10–18 million
• 20% — VND 18–32 million
• 25% — VND 32–52 million
• 30% — VND 52–80 million
• 35% — above VND 80 million

Personal allowance: VND 11,000,000/month for the taxpayer; VND 4,400,000/month per qualified dependent. Compulsory social insurance (8% employee), health insurance (1.5%), unemployment insurance (1%) — total 10.5% from the employee, plus ~21.5% from the employer.

Under Finance Act 2025, the New Tax Regime (Section 115BAC) is the default. The headline change for FY 2025-26: a full Section 87A rebate makes income up to ₹12,00,000 effectively tax-free for resident individuals.

New Tax Regime slabs (FY 2025-26)

• 0% — up to ₹4,00,000
• 5% — ₹4,00,001 to ₹8,00,000
• 10% — ₹8,00,001 to ₹12,00,000
• 15% — ₹12,00,001 to ₹16,00,000
• 20% — ₹16,00,001 to ₹20,00,000
• 25% — ₹20,00,001 to ₹24,00,000
• 30% — above ₹24,00,000

Standard deduction (salaried, new regime): ₹75,000. Surcharge applies on incomes above ₹50 lakh — 10% / 15% / 25% (max under new regime). Health & Education Cess of 4% on tax + surcharge. The Old Regime (with 80C, HRA, LTA, home-loan interest, etc.) remains optional.

The Inland Revenue Department (IRD) of Nepal restructured the personal income tax scale in FY 2083/84 BS (mid-July 2026 – mid-July 2027). The threshold for the first slab was raised significantly, and the top rate was cut. Currency below is NPR (Rs).

Personal income tax slabs — individual (FY 2083/84)

• 1% — up to Rs 10,00,000
• 10% — Rs 10,00,001 to Rs 15,00,000
• 20% — Rs 15,00,001 to Rs 25,00,000
• 27% — Rs 25,00,001 to Rs 40,00,000
• 29% — above Rs 40,00,000

Key changes from prior FY: first slab raised from NPR (Rs) 5 lakh → NPR (Rs) 10 lakh (individuals) / NPR (Rs) 6 lakh → NPR (Rs) 10 lakh (married). Top rate cut from 39% → 29%. The 1% on the first NPR (Rs) 10 lakh may be exempt for eligible Social Security Fund (SSF) / approved retirement-fund contributors. [Source: Tax Advisor Nepal, citing Finance Act 2082; IRD.].

Worked example — annual taxable income Rs 18,00,000

• First Rs 10,00,000 @ 1% = Rs 10,000
• Next Rs 5,00,000 @ 10% = Rs 50,000
• Remaining Rs 3,00,000 @ 20% = Rs 60,000
• Total = Rs 1,20,000 (or Rs 1,10,000 if SSF-eligible)

Nepal freelancer tax — 5% advance tax on foreign income (deep dive)

If you are a freelancer based in Nepal and you earn from foreign companies, you pay a 5% advance tax — dramatically lower than salaried slab rates. This regime applies to foreign-sourced freelance income such as software development, design, consulting, content creation (YouTube, blogs, courses), and other services rendered to clients outside Nepal.

How it works in practice: when a foreign client pays you, the receiving Nepali bank deducts 5% as advance tax at the point of remittance. Invoice a foreign client NPR 100,000, the bank deducts NPR 5,000, you receive NPR 95,000 net. That 5% is final tax on the foreign-sourced freelance income — no additional income tax is payable later.

Eligibility requirements

• Tax resident of Nepal in the relevant fiscal year (typically 183+ days, or a fiscal-year domicile test).
• Income must be foreign-sourced — paid by a non-Nepali entity for services rendered.
• You operate as an individual freelancer or sole proprietor, not as a registered company billing for services.
• Income is service-based (software, design, consulting, content) — passive income streams (rent, dividends from foreign listed equities, capital gains) follow separate rules.

PAN and registration

• Apply for a Personal PAN (Permanent Account Number) with the Inland Revenue Department before the first foreign remittance.
• Required documents: citizenship certificate, passport-size photos, residence proof, mobile and email.
• Personal PAN is free and typically issued in 1–3 working days at the IRD office or via the e-PAN portal.
• Distinguish Personal PAN (for individual freelancers) from Business PAN / VAT registration (required if annual turnover crosses the VAT threshold or you operate a registered firm).

Banking and remittance

• Receive payments through a Nepali commercial bank with foreign-currency-handling authority (most A-class banks).
• Wise, Payoneer, and similar PSPs are commonly used to receive client payments before settling into a Nepali bank — final inward remittance into NPR triggers the 5% deduction.
• Provide the bank with: PAN, invoice copy, purpose-of-remittance code (typically 'service export'), and SWIFT details.
• The bank issues a TDS / advance tax deduction certificate — keep every one of these; they are your audit trail.

Documentation to maintain

• Invoices issued to each foreign client (numbered, dated, with PAN and service description).
• Inward remittance advice from the bank for every payment received.
• Bank-issued advance tax / TDS certificates.
• Client contracts or scopes of work (especially for higher-value engagements).
• Annual income summary for the fiscal year (mid-July to mid-July, Nepali fiscal calendar).

Year-end compliance

• File an annual income tax return with the IRD (D-04 individual return) by the statutory due date — even if the 5% is final tax, the return formalises the position.
• Obtain a tax-clearance certificate at year-end — required for visa renewals, larger banking transactions, and government tenders.
• Reconcile bank-deducted advance tax against IRD records to confirm credit.

Common misconceptions — Nepal freelancer 5% rule

• '5% only — nothing else applies.' True for foreign-sourced service income only. Local Nepali clients, rental income, capital gains, and any business turnover crossing VAT thresholds follow normal rules.
• 'I don't need a PAN if it's just freelance.' Banks will hold or reject remittances without PAN, and IRD treats unregistered foreign income as non-compliant.
• 'Wise / Payoneer balances escape Nepali tax.' Once funds settle into a Nepali bank account, the 5% applies. Permanent residency in Nepal means worldwide-source rules can apply regardless of where the balance sits.
• 'I can register a company to avoid the 5%.' A registered firm faces corporate tax (typically 25%) on profits — usually more, not less, for solo freelancers.
• 'Filing a return is optional because tax was deducted at source.' The 5% is final tax on that stream, but you still file the annual return; skipping it complicates tax-clearance and future audits.

Nepal — capital gains, dividends, social security

• Listed shares: 5% CGT for resident individuals; unlisted: 7.5%.
• Land/building: 2.5% (held > 5 years) or 5% (≤ 5 years).
• Dividend (resident company → resident individual): 5% final withholding.
• Bank interest TDS: 5%, final for individuals.
• SSF: 11% employee + 20% employer of basic salary (total 31%).

Tax residency decides the scope of the tax base. Two countries can have identical headline rates and still produce wildly different outcomes because one taxes worldwide income and the other taxes only what is earned inside its borders. For a globally mobile employee or a contractor working with foreign clients, this is often the single most important variable.

Practical implication: a Nepali freelancer billing US clients pays the 5% Nepali advance tax on foreign-source income, but a US citizen freelancer doing the same work still owes US federal tax regardless of where they live. Residency is structural — it cannot be redesigned around with payment routing alone.

A tax-rate table tells you almost nothing about the real cost of employing someone. Total employment cost is the gross salary, plus statutory employer contributions, plus mandatory bonuses, plus paid-leave accruals, plus the operational cost of running compliant payroll in that country. The headline rate is one input among many.

Tax rate vs total employment cost

• Employer-side social security can add anywhere from ~7.65% (US FICA) to ~25-35% (Mexico IMSS + Infonavit + ISN) on top of gross.
• Mandatory bonuses (Aguinaldo in Mexico, 13th month in Philippines, statutory bonus in India) are real cash costs and must be in the offer math.
• Paid-leave accruals — Vietnam 12 days, India 15-21 days, Philippines 5 SIL — quietly add 4-8% to effective employment cost.
• Termination liabilities (statutory severance, gratuity in India) are off the P&L until they aren't.

Employer obligations to plan for

• Payroll registration and monthly withholding deposits with the tax authority.
• Social security registration (SSS, EPF, IMSS, CPP, SSF, BHXH depending on country) and monthly contributions.
• Annual statutory filings, employee tax certificates (Form 16 / 2316 / W-2 / T4 equivalents).
• Statutory leave, public holidays, and mandatory bonus calendars.
• Local-language employment contracts where required (Mexico LFT, Vietnam Labour Code).

Contractor vs employee — the decision that gets people sued

• Contractor regimes (Nepal 5%, Philippines 8% flat, India professional services TDS) look dramatically cheaper than employment.
• Each country has a multi-factor test (control, integration, economic dependence, tools, exclusivity) — labels in the contract are not determinative.
• Misclassification penalties typically include back-withholding, social security catch-up, interest, and fines — often 2-3x the original tax saved.
• Permanent Establishment (PE) risk: a contractor who effectively acts as a manager or signs contracts can create a taxable presence for the foreign company.
• Employer of Record (EOR) services exist precisely to convert this risk into a predictable per-employee fee.

Compliance risk — the slow-burn liabilities

• Cross-border data privacy (GDPR, India DPDP Act, Philippines DPA) on HR records.
• Withholding on intercompany service charges — frequently mishandled in early-stage groups.
• Treaty relief eligibility — Tax Residency Certificates (TRCs) must be obtained in advance.
• Equity compensation: vesting, exercise, and sale events trigger tax in the country of work at each point, often with employer withholding obligations.

• Always quote take-home, not gross — payroll math differs wildly even between neighbouring countries.
• For India hires in FY 2025-26: the new regime is the default, and ₹12 lakh effective zero-tax materially changes mid-market offers.
• For Nepal contractors paid in USD: the 5% advance tax route is dramatically cheaper than employing locally — but only if PAN and bank remittance docs are in order.
• For Canada: never quote federal-only; provincial tax is the swing factor between Quebec and Alberta.
• For the US: TCJA brackets sunset after 2025 unless extended — model both scenarios for 2026 offers.