VAT and Sales Tax in Palau

Palau does not impose a Value Added Tax (VAT), Goods and Services Tax (GST), or any general sales tax. This makes Palau one of the few jurisdictions with no broad-based consumption tax.

No VAT / Sales Tax

Palau has no VAT, no GST, and no general sales tax at the national level. There is no consumption tax added to goods or services at the point of sale. This applies to all transactions within the country.

Revenue Sources

Instead of a consumption tax, the Palau government raises revenue primarily through:

• Personal income tax (PIT flat 9.5% above $10,000)
• Gross Revenue Tax (4% GRT on gross revenue above $500K)
• Import duties and customs tariffs
• Business license fees and other administrative charges
• Property taxes and transfer taxes

Import Duties

While there is no VAT, goods imported into Palau may be subject to customs duties and import taxes. These are collected at the border by the customs authority. The rates vary depending on the type of goods.

Comparison with Other Countries

Most countries in the Pacific region and globally impose a VAT or sales tax. Palau's absence of such a tax can be a competitive advantage for businesses and consumers:

• No VAT burden on consumer purchases
• Simpler compliance for businesses (no VAT returns)
• No input VAT recovery issues
• Lower effective prices for goods and services

Future Developments

There have been discussions about introducing a consumption tax in Palau to broaden the tax base. As of 2026, no VAT legislation has been enacted, and the 0% rate remains in effect.