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Non-Resident Tax

A new tax, called “non-resident tax” is imposed on a non-resident person who derives interest, a royalty, or insurance premium in Palau.

The rate of non-resident tax is determined in accordance with subsection (b) to be:

    • for insurance premiums, five percent (5%); or
    • for any other amount (such as interest), ten percent (10%).

The tax non-residents does not apply to the following:

    • an amount that is exempt income within the meaning of section 1433; or
    • an amount derived by a non-resident that is attributable to a business carried on
    • in Palau through a permanent establishment in the Republic. In this case, the
    • amount is subject to business profits tax.

Tax is imposed on the gross amount of income derived by the non-resident person (as listed above) with no deduction allowed for expenditures or losses incurred in deriving the income.

The tax is collected through withholding by the person paying the interest, royalty, or insurance premium at the time of making the payment