Palau

{"ftc_utility":"low","fbar_trigger_notes":"Palau uses the US dollar as its official currency and has limited domestic banking infrastructure. Most expats maintain accounts at the Bank of Hawaii or NDBP (National Development Bank of Palau). Any account or combination of accounts exceeding $10,000 at any point in the year triggers FBAR reporting on FinCEN 114.","ftc_utility_reason":"Palau's top income tax rate is only 12%, well below the US top federal rate of 37%. Foreign Tax Credits generated by Palau taxes provide only partial shelter against US tax liability. Most US expats in Palau will find the FEIE more advantageous than the FTC for earned income, though both may be used in combination.","presence_day_count_notes":"US citizens can enter Palau visa-free and may remain indefinitely under the Compact of Free Association between the US and Palau. There is no statutory limit on stay duration for US citizens, so accumulating 330 qualifying days in a 12-month period is straightforward. Days spent in Palau count toward the physical presence test.","typical_qualifying_method":"either","housing_exclusion_available":true,"physical_presence_test_applies":true,"estimated_housing_exclusion_usd":14000,"local_tax_rate_on_earned_income":0.12,"bona_fide_residence_test_applies":true}

{"pension_income":{"notes":"Pension income received by Palau residents is taxable as ordinary income under the wage and salary tax at progressive rates up to 12%. No specific pension income exemption exists in Palau law.","tax_rate":0.12,"locally_taxed":true},"social_security":{"notes":"No US-Palau totalization agreement or income tax treaty exists. US Social Security benefits received by a Palau resident are included in gross income and subject to progressive wage and salary tax. No local exemption applies.","locally_taxed":true,"treaty_protection":false},"roth_distributions":{"notes":"Roth distributions are generally after-tax contributions returned to the taxpayer. Palau's tax system taxes income at the time of receipt; qualified Roth distributions representing a return of basis should not be taxable, though there is limited specific guidance from Palau tax authorities on this point.","locally_taxed":false},"us_401k_ira_distributions":{"notes":"There is no US-Palau tax treaty. Distributions from US 401(k) or IRA accounts received by a Palau resident are treated as ordinary income under Palau's wage and salary tax and subject to progressive rates up to 12%. No treaty relief is available.","tax_rate":0.12,"locally_taxed":true,"treaty_protection":false}}

{"rate":0.12,"notes":"Palau has no separate capital gains tax. Gains are folded into gross income and taxed at progressive rates under the Palau wage and salary tax, with the top rate at 12%.","details":{"tax_type":"Capital Gains Tax","country_name":"Palau","country_iso_code":"PLW","source_references":["Palau Bureau of Revenue and Taxation","KPMG Pacific Islands Tax Guide","US Department of State"],"last_verified_date":"2026-06-03","general_description":"Palau does not impose a standalone capital gains tax. Capital gains realized by individuals are treated as ordinary income and subject to the progressive wage and salary tax schedule, topping out at 12%. Gains on the sale of real property by non-residents may be subject to withholding at source.","corporate_capital_gains":{"rate":0.04,"tax_treatment":"Corporate entities in Palau pay a gross revenue tax at a flat rate of 4% on gross receipts. Capital gains are included in gross revenue and taxed at this rate rather than at a separate capital gains rate."},"individual_capital_gains":{"rate":0.12,"tax_treatment":"No separate capital gains regime. Gains are included in taxable income and taxed under the progressive wage and salary tax schedule at rates from 6% to 12%."}}}

{"notes":"Palau does not impose a separate dividend withholding tax in the traditional sense. Distributions from Palauan corporations to non-resident shareholders may be subject to withholding under the gross revenue tax framework. There is no comprehensive dividend withholding tax statute comparable to OECD jurisdictions. Resident individuals receiving dividend income include it in gross income subject to the progressive wage and salary tax.","rates":[{"rate":0.04,"type":"withholding","notes":"Approximate withholding applicable to payments to non-residents under gross revenue tax rules."},{"rate":0.12,"type":"progressive","notes":"Resident individuals include dividends in ordinary income; top marginal rate is 12%."}]}