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Timor-Leste Personal Tax Guide: Progressive PIT 0-10% 2026

Timor-Leste applies a progressive personal income tax (PIT) system with rates of 0% and 10%. The first USD 6,000 of annual income is tax-free. All income above USD 6,000 per year is taxed at a flat 10%. Here is how Timorese personal tax works in 2026.

Personal Income Tax in Timor-Leste is governed by the Income Tax Act (Law No. 8/2008) and administered by the Autoridade Nacional do Imposto (ANI). The tax year is the calendar year. Timor-Leste operates a territorial tax system — residents are taxed only on Timor-Leste-source income, not worldwide income. Non-residents are taxed only on Timor-Leste-source income. The system is extremely simple with just two brackets and a very low top rate of 10%. Check residency rules →

Real-world example: An employee earning USD 1,000 per month (USD 12,000 annually) pays 0% on the first USD 6,000 = USD 0, and 10% on the remaining USD 6,000 = USD 600. Annual PIT: USD 600. Effective tax rate: 5%. For a high earner at USD 5,000/month (USD 60,000 annually): 0% on USD 6,000, 10% on USD 54,000 = USD 5,400. Effective rate: 9%. Compared to regional peers, Timor-Leste's top rate of 10% is among the lowest in Asia, significantly lower than Indonesia (30%), Philippines (35%), and Australia (45%). Corporate tax rates →

Personal Income Tax Rates 2026

  • 0% — Annual income up to USD 6,000 (tax-free threshold)
  • 10% — Annual income above USD 6,000

The system applies to employment income, business income for individuals, and other personal income. There is no separate surtax or solidarity contribution. Timor-Leste does not have a joint filing system for married couples — each individual files separately. Withholding tax on employment income is deducted at source by the employer.

Taxable Income Categories

Timorese PIT applies to several categories of income:

  • Employment income: Salaries, wages, bonuses, allowances, and benefits-in-kind — all subject to progressive PIT via payroll withholding
  • Business income: Self-employed individuals and sole proprietors are taxed at progressive PIT rates
  • Rental income: Income from property leasing is taxed at progressive PIT rates after allowable deductions
  • Investment income: Dividends, interest, and royalties are subject to separate withholding tax rates rather than being included in progressive PIT
  • Capital gains: No separate capital gains tax; gains taxed as ordinary income under PIT or CIT

Employment income is subject to monthly withholding by the employer. The employer deducts PIT before paying the net salary. Employees receive a payslip showing gross pay, deductions, and net pay. Annual filing requirements →

Tax Credits and Deductions

Timor-Leste offers limited tax credits and deductions for individuals:

  • Personal allowance: The USD 6,000 annual threshold serves as the primary personal allowance
  • Dependents: Additional allowances may apply for dependent children and spouses
  • Social security: No social security contributions exist — no deduction applicable
  • Charitable donations: Donations to registered non-profit organizations may be deductible
  • Business expenses: Self-employed individuals can deduct legitimate business expenses

Tax deductions generally require documented expenses. The ANI provides guidelines on which deductions are allowable. The system is designed to be simple, reflecting the country's developing tax administration.

Social Security Contributions

Timor-Leste does not have a mandatory social security system. There are no employee or employer social insurance contributions. The government provides limited social assistance through the Ministry of Social Solidarity, but there is no contributory social security scheme. This means employees keep their full gross salary minus only PIT withholding. Social contributions guide →

Who must file a Timorese personal tax return?

Individuals with employment income only (where tax was fully withheld at source) generally do not need to file. Self-employed individuals, those with multiple income sources, or those earning above USD 6,000 annually must file an annual return by March 31. Non-residents with Timor-Leste-source income must also file.

Are bonuses and 13th-month salary taxed?

Yes. Bonuses, commissions, and additional payments are treated as ordinary employment income and taxed at the progressive PIT rates. There is no special treatment for year-end bonuses, 13th-month salaries, or performance incentives. Employers include all cash and non-cash benefits in the payroll calculation.

Is there a wealth tax or net worth tax in Timor-Leste?

No. Timor-Leste does not impose a wealth tax, net worth tax, or solidarity tax on individuals. Property transfer taxes apply on transactions, and there is a minimal annual land tax, but no tax on total net worth. See the wealth tax guide for details. Wealth tax guide →

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