What Is Worldwide Taxation?
Worldwide Taxation is a tax system principle under which a country taxes residents on income from all sources, with residence criteria set by national law.
Also known as: Residence-based worldwide taxation, Global income taxation.
How Worldwide Taxation works
Worldwide Taxation applies once a person becomes tax resident in a country using this principle, and the country then taxes income from every source, domestic and foreign, employment or business, active or passive, while relieving double taxation through foreign tax credits, exemptions or treaty rules. Residence tests decide who falls in scope, so a move abroad changes liability only when residence actually ends. The United States extends the principle to citizens wherever they live. Many countries combine worldwide taxation with special regimes or partial exemptions, so the scope differs by country.
Worldwide Taxation vs Territorial Tax System
Unlike a Territorial Tax System, which generally taxes only locally sourced income, Worldwide Taxation reaches a resident's foreign income as well.
Example
Illustrative example: A marketer resident in Country A, which applies Worldwide Taxation, earns fees from clients in Country B. Country A taxes the fees and generally credits any Country B tax. If the marketer were a US citizen, the IRS states that worldwide income remains taxable by the United States even while living abroad.
Common misconception
Myth: Income earned abroad is only taxed where the work is done.
Reality: Under Worldwide Taxation, the residence country generally taxes foreign income too, with relief for foreign tax through credits, exemptions or treaties.
Frequently asked questions
What is worldwide taxation?
Worldwide Taxation is the principle under which a country taxes its residents on income from all sources, domestic and foreign, generally with credits or exemptions for foreign tax.
Does the US tax worldwide income of citizens abroad?
The IRS states that US citizens and resident aliens living abroad are subject to tax on worldwide income from all sources, generally with relief such as the foreign tax credit.
Related terms
- Territorial Tax System — Opposite principle, often confused
- Citizenship-Based Taxation — US extension of worldwide taxation to citizens
- Foreign Tax Credit (FTC) — Main relief against double taxation
- Remittance Basis — Regime limiting worldwide taxation for some residents
- Tax Jurisdiction — Jurisdiction reaching all income of residents
Related guides
- Digital nomad tax setups guide — How residence choices change taxed income
Sources
Last verified: 2026-10-09. This entry is general information, not tax or legal advice; rules vary by country and change over time.
