Timor-Leste taxes resident individuals on worldwide income at progressive rates from 0% to 10% and companies at a standard flat 10% rate (30% for oil and gas contractors, 6% for subcontractors, with a Supplemental Petroleum Tax also applying to contractors), administered under Timor-Leste's tax legislation. Non-residents are taxed at a flat 10% on Timor-Leste-source income.
The tax year generally follows the calendar year; resident individuals are taxed on worldwide income with a foreign tax credit available where foreign-source income was taxed at source, described further below.
10% standard flat rate (30% for oil and gas contractors; 6% for oil and gas subcontractors); Supplemental Petroleum Tax also applies to oil and gas contractors.
Progressive 0% to 10% for residents on worldwide income; flat 10% for non-residents on Timor-Leste-source income (including Wage Income Tax withholding).
No VAT; a limited sales tax applies at 2.5% on imported taxable goods and 0% on goods/services sold and delivered domestically.
An individual is resident if present in Timor-Leste for more than 183 days in a 12-month period. Residents are taxed on worldwide income (both Timor-Leste and foreign-sourced), with a foreign tax credit available where foreign-source income was taxed at source. Non-residents are generally taxed on Timor-Leste-source income attributed to a permanent establishment; non-residents without a PE may instead face a 10% withholding tax.
A non-resident is generally taxed on Timor-Leste-source income attributed to a permanent establishment maintained in the country; a non-resident without a Timor-Leste permanent establishment instead faces a flat 10% withholding tax on Timor-Leste-source payments, consistent with the residence-based framework described elsewhere on this page.
Timor-Leste has no Controlled Foreign Company regulations. Specifically, it has no mechanism to deem the repatriation of profit retained in a controlled foreign company, meaning undistributed foreign-entity profits are not attributed back to Timor-Leste residents under current law.
There are no thin capitalisation or similar rules in Timor-Leste. Instead, a much stricter blanket rule applies: interest is generally not deductible at all for corporate tax purposes, except for financial institutions specifically.
Timor-Leste classifies entities under its own domestic tax legislation rather than offering an elective check-the-box system, and no ATAD2-style anti-hybrid mismatch regime addressing double-deduction or deduction-without-inclusion outcomes has been identified, consistent with Timor-Leste having no CFC regulations and no arrangements to otherwise deem the repatriation of profit retained in a controlled foreign company, as described in the CFC section of this page. Timor-Leste's blanket disallowance of interest deductions for non-financial-institution corporate taxpayers (described elsewhere on this page) functions as the jurisdiction's primary base-protection mechanism in the absence of thin capitalization, CFC, or anti-hybrid rules.
No domestic FBAR-equivalent regime requires Timor-Leste residents to separately disclose foreign financial accounts, and Timor-Leste is not currently a CRS participating jurisdiction, so it does not automatically exchange financial account information with foreign tax authorities under the OECD's Common Reporting Standard. US persons remain independently subject to FinCEN Form 114 (FBAR) and potentially Form 8938 regardless of Timor-Leste's own rules.
No dedicated participation exemption regime for dividends or capital gains from a qualifying subsidiary was identified in Timor-Leste's tax legislation; confirm current treatment of intercompany dividends and share disposals directly with Timor-Leste's tax authority before relying on this page.
Resident individuals are entitled to a foreign tax credit where foreign-source income was taxed at source, preventing double taxation on their worldwide income; Timor-Leste's only comprehensive income tax treaty is with Portugal, with additional petroleum-sector-specific relief embedded separately in the Timor Sea Treaty, a bilateral resource-sharing arrangement rather than a conventional income tax treaty, described elsewhere on this page.
Timor-Leste has entered into a double taxation treaty with only one country, Portugal, confirmed directly and consistently via PwC and two independent specialist sources. Distinctively, additional treaty-like relief specific to the petroleum sector is separately embedded in the Timor Sea Treaty (TST), a bilateral petroleum-resource-sharing arrangement rather than a conventional income tax treaty.