Tax
A low-rate regime funded largely by petroleum revenue
The Taxes and Duties Act of 2008 sets a flat 10 percent corporate and top personal income tax rate. There is no VAT. The state budget is overwhelmingly financed from the Petroleum Fund rather than domestic taxation, which explains the unusually light general tax burden.
Key rules
- Jurisdiction — National. Administered by the Tax Authority under the Ministry of Finance.
- Deadline — Annual income tax returns are due by 31 March following the tax year
Governing law
- Taxes and Duties Act (Law No. 8/2008) — income tax, sales tax and excise
- Petroleum Fund Law (Law No. 9/2005, as amended) — management of petroleum receipts
In practice
Corporate income tax is 10 percent, as is the top marginal rate of personal income tax, with a substantial tax-free threshold. A sales tax applies to imported goods; domestic sales tax is set at zero. Withholding taxes apply to specified payments including rent and services. Petroleum operations are taxed under a separate and considerably heavier regime, and receipts flow into the Petroleum Fund, from which transfers to the budget are governed by an estimated sustainable income rule. Understanding the Petroleum Fund Law is therefore essential to understanding Timorese public finance.