Timor-Leste has emerged as an attractive destination for global investors due to its highly competitive tax policies and investment incentives. Below is a detailed overview of Timor-Leste's tax policies and investment incentives:

I. Tax Policies

1. Corporate Income Tax

• Corporate income tax is set at 10%, making it one of the lowest corporate tax rates in the world.

• Applicable to all enterprises registered in Timor-Leste.

2. Personal Income Tax

• Personal income tax follows a progressive tax rate ranging from 0% to 10%, depending on income levels.

3. Wage Income Tax

• Wage income tax also follows a progressive tax rate ranging from 0% to 10%.

4. Withholding Income Tax

• Withholding income tax rates vary from 2% to 10%, depending on the type of income.

5. Sales Tax

• A sales tax of 2.5% applies to taxable imported goods, while taxable goods and services sold and delivered within Timor-Leste are tax-free (0% rate).

6. Service Tax

• A service tax of 5% applies to catering services, restaurant and bar services, and telecommunications services with monthly turnovers exceeding USD 500.

7. Import Duties

• Import duties are set at 2.5% of the value of the imported goods.

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II. Investment Incentives

1. Eligibility for Incentives

• Domestic and foreign investors who invest or reinvest within Timor-Leste and whose investments contribute to the socio-economic development of the country.

• Not applicable to investments by state or public entities.

• Investments by legal entities holding more than 50% of capital from the state or other public entities are not included in tax and tariff incentives.

2. Incentive Measures

• Tax Incentives: Enterprises related to investment or reinvestment projects can enjoy exemptions of up to 100% on corporate income tax, sales tax, and service tax.

• Tariff Incentives: Enterprises related to investment or reinvestment projects can enjoy exemptions of 100% on import duties for all capital goods and equipment used in the construction or management of the investment or reinvestment projects.

• Special Incentives for Investors: A guarantee of issuing at least five work visas for qualified employees who must have guide or technical functions related to the investment project. State-owned asset lease contracts for implementing investment projects can have a maximum term of 50 years, renewable for an additional 25 years, with a total maximum term of 100 years.

• Special Incentives for Different Regions:

  • Zone A: A maximum tax exemption period of 5 years for the administrative areas of Jesus Hill, Dom Aleixo, Nain Feto, and Vila Cruz in Dili District.

  • Zone B: A maximum tax exemption period of 8 years for areas outside the boundaries of Dili District.

  • Zone C: A maximum tax exemption period of 8 years for the regions of Oecusse and Atauro Island.

Timor-Leste's tax policies and investment incentives offer a highly attractive business environment for investors seeking low tax rates and high returns, making it an ideal choice for global investors.