The cost of living in Palau is estimated to be affordable, with an estimated CPI around 45.0 (NYC=100). While rent is relatively low (Rent Index: 19.86), groceries are expensive (Groceries Index: 90.13) due to high import dependency, and restaurant prices are moderate (Restaurant Price Index: 51.98).

The housing market is moderate. Foreigners cannot own land directly but can lease it for terms up to 50 or 99 years (government land). The rental market is affordable (Rent Index: 19.86), but direct property acquisition for expats is challenging due to constitutional restrictions on land ownership.

The average income is below average, with a GDP per capita of approximately $15,899 in 2023. The average gross monthly salary is $1,800, and the median is $1,000. The minimum wage is increasing to $4.25/hour in October 2024 and $5/hour in October 2025.

Palau has a progressive income tax system: 6% for income up to $8,000, 10% for $8,001-$40,000, and 12% for income above $40,000. A 10% Palau Goods and Services Tax (PGST) was implemented in January 2023, alongside a 12% Business Profits Tax on net income.

Palau's business environment is challenging, ranking 145 out of 190 economies in the World Bank's 2020 Doing Business report. Restrictions exist on foreign ownership in certain sectors, and a Foreign Investment Business License (FIBL) is required for non-citizens. Efforts are underway to streamline business registration with a 'One-Stop-Shop' initiative.

Palau has a universal healthcare system through the Palau Health Care Fund, covering in-patient, off-island referrals, and outpatient services. A social insurance system provides old-age, disability, and survivor pensions, with employees and employers contributing 7% to the Retirement Fund. Access to specialized medical care can be limited, especially in remote areas.

Palau's banking system is highly stable, utilizing the U.S. dollar and featuring three FDIC-insured U.S. banks. Deposits are protected up to USD 250,000 per depositor per insured bank under the U.S. Federal Deposit Insurance Corporation (FDIC) scheme. The Palau Financial Institutions Commission (FIC) provides regulatory oversight, and the banking sector maintains strong liquidity and capitalization.