Territorial Taxation

Territorial taxation is a tax system in which a country only taxes income earned or sourced within its borders, exempting foreign-sourced income from domestic tax. Countries such as Panama, Paraguay, Georgia, and the UAE operate territorial tax systems that are attractive to internationally mobile individuals and businesses. Under a territorial system, a resident who earns all income outside the country pays little or no local income tax. This contrasts with worldwide taxation, which taxes residents on their global income regardless of where it is earned.