also called territorial tax system · source-based taxation
A system where a country taxes only income earned inside its borders and leaves foreign income untaxed.
A country with territorial taxation only cares about money made inside its borders. Work a local job or rent out a local flat and it taxes that; income from clients, employers, or investments abroad is simply left alone. Panama, Georgia, and Paraguay are the classic nomad examples, which is why they appear on every foreign-income tax list.
You live in Panama City on a remote salary paid by a US company into a US account. Panama's system looks at where the income comes from, sees that it is foreign, and asks for nothing, while your neighbor with a local job pays Panamanian tax on every paycheck.
Living in a territorial-tax country can mean foreign-earned income is legally untaxed there, a core nomad tax strategy.
The difference is the whole point, so here is each one in a line.
These are the systems for deciding which of your income a country can tax.
Worldwide taxation taxes residents on income from everywhere, territorial taxation only on income earned inside the country, and the remittance basis only on foreign income you actually bring in.
Citizenship-based taxation is the rare system, used by very few countries, that taxes citizens wherever they live.
Citizenship-based taxation · Remittance basis · Worldwide taxation
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