Worldwide Taxation
A system that taxes residents or citizens on income earned anywhere in the world.
Worldwide (or residence-based) taxation is a system in which a country taxes its residents on their global income, regardless of where it is earned. This contrasts with territorial taxation, which only taxes income sourced within the country. To prevent the same income being taxed twice, worldwide systems typically grant foreign tax credits or exemptions under tax treaties. The United States is unusual in applying worldwide taxation based on citizenship, so US citizens owe US tax even while living abroad.
Examples
- The US taxes citizens on worldwide income regardless of residence.
- Most worldwide-tax countries offer a foreign tax credit to offset taxes already paid abroad.