also called single-rate tax
An income tax charged at one fixed percentage rate regardless of how much you earn.
An income tax charged at a single fixed percentage no matter how much you earn, so a bigger income still means a bigger bill, just at the same rate. It is easy to mix up with lump-sum taxation, which is a set amount you pay regardless of income, so the more you earn the smaller a share it becomes. One scales with your earnings, the other does not.
Someone comparing two low-tax countries assumes a flat tax and a lump-sum deal work the same way and picks based on a rough guess. Because a flat tax rises with their high income while the lump sum would have stayed fixed, they badly misjudge which one actually leaves them with more.
A flat tax still scales with income because it is a percentage, while lump-sum taxation is a fixed amount you pay no matter your income. Nomads comparing low-tax regimes confuse the two and badly misjudge what they would actually owe.
The difference is the whole point, so here is each one in a line.
These are the favourable schemes some countries offer people who move in.
Non-dom status treats a resident whose permanent home is elsewhere kindly on foreign income, Portugal's Non-Habitual Resident and Spain's Beckham Law are time-limited versions of that idea, and lump-sum taxation in Switzerland and Italy lets certain wealthy residents pay a fixed annual amount instead of tax on actual worldwide income.
A flat tax is the broader idea of one fixed rate regardless of how much you earn.
A new term lands on this site every day, and the email is how you get it the day it lands. No digest, no roundup, no pitch. One term, what it means, and what it costs you to get it wrong.
Unsubscribe in one click, any time. We do not sell or share your address.