Taxation Systems
Countries that tax income generally use one of two systems: territorial or residential. In the territorial system, only local income – income from a source inside the country – is taxed. In the residential system, residents of the country are taxed on their worldwide (local and foreign) income, while nonresidents are taxed only on their local income. In addition, a very small number of countries, notably the United States, also tax their nonresident citizens on worldwide income.
Countries with a residential system of taxation usually allow deductions or credits for the tax that residents already pay to other countries on their foreign income. Many countries also sign tax treaties with each other to eliminate or reduce double taxation. In the case of corporate income tax, some countries allow an exclusion or deferment of specific items of foreign income from the base of taxation.
Read more about this topic: International Taxation
Famous quotes containing the words taxation and/or systems:
“Every diminution of the public burdens arising from taxation gives to individual enterprise increased power and furnishes to all the members of our happy confederacy new motives for patriotic affection and support.”
—Andrew Jackson (1767–1845)
“People stress the violence. That’s the smallest part of it. Football is brutal only from a distance. In the middle of it there’s a calm, a tranquility. The players accept pain. There’s a sense of order even at the end of a running play with bodies stewn everywhere. When the systems interlock, there’s a satisfaction to the game that can’t be duplicated. There’s a harmony.”
—Don Delillo (b. 1926)