International taxation

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International taxation is the study or determination of tax on a person or business subject to the tax laws of different countries, or the international aspects of an individual country's tax laws as the case may be. Governments usually limit the scope of their income taxation in some manner territorially or provide for offsets to taxation relating to extraterritorial income. The manner of limitation generally takes the form of a territorial, residence-based, or exclusionary system. Some governments have attempted to mitigate the differing limitations of each of these three broad systems by enacting a hybrid system with characteristics of two or more.

Many governments tax individuals and/or enterprises on income. Such systems of taxation vary widely, and there are no broad general rules. These variations create the potential for double taxation (where the same income is taxed by different countries) and no taxation (where income is not taxed by any country). Income tax systems may impose tax on local income only or on worldwide income. Generally, where worldwide income is taxed, reductions of tax or foreign credits are provided for taxes paid to other jurisdictions. Limits are almost universally imposed on such credits. Multinational corporations usually employ international tax specialists, a specialty among both lawyers and accountants, to decrease their worldwide tax liabilities.

With any system of taxation, it is possible to shift or recharacterize income in a manner that reduces taxation. Jurisdictions often impose rules relating to shifting income among commonly controlled parties, often referred to as transfer pricing rules. Residency-based systems are subject to taxpayer attempts to defer recognition of income through use of related parties. A few jurisdictions impose rules limiting such deferral ("anti-deferral" regimes). Deferral is also specifically authorized by some governments for particular social purposes or other grounds. Agreements among governments (treaties) often attempt to determine who should be entitled to tax what. Most tax treaties provide for at least a skeleton mechanism for resolution of disputes between the parties.

Introduction

Systems of taxation vary among governments, making generalization difficult. Specifics are intended as examples, and relate to particular governments and not broadly recognized multinational rules. Taxes may be levied on varying measures of income, including but not limited to net income under local accounting concepts (in many countries this is referred to as 'profit'), gross receipts, gross margins (sales less costs of sale), or specific categories of receipts less specific categories of reductions. Unless otherwise specified, the term "income" should be read broadly.

Jurisdictions often impose different income-based levies on enterprises than on individuals. Entities are often taxed in a unified manner on all types of income while individuals are taxed in differing manners depending on the nature or source of the income. Many jurisdictions impose tax at both an entity level and at the owner level on one or more types of enterprises.[1] These jurisdictions often rely on the company law of that jurisdiction or other jurisdictions in determining whether an entity's owners are to be taxed directly on the entity income. However, there are notable exceptions, including U.S. rules characterizing entities independently of legal form.[2]

In order to simplify administration or for other agendas, some governments have imposed "deemed" income regimes. These regimes tax some class of taxpayers according to tax system applicable to other taxpayers but based on a deemed level of income, as if received by the taxpayer. Disputes can arise regarding what levy is proper. Procedures for dispute resolution vary widely and enforcement issues are far more complicated in the international arena. The ultimate dispute resolution for a taxpayer is to leave the jurisdiction, taking all property that could be seized. For governments, the ultimate resolution may be confiscation of property, incarceration or dissolution of the entity.

Other major conceptual differences can exist between tax systems. These include, but are not limited to, assessment vs. self-assessment means of determining and collecting tax; methods of imposing sanctions for violation; sanctions unique to international aspects of the system; mechanisms for enforcement and collection of tax; and reporting mechanisms.

Taxation systems

Systems of taxation on personal income
  No income tax on individuals
  Territorial
  Residence-based
  Citizenship-based

Countries that tax income generally use one of two systems: territorial or residence-based. In the territorial system, only local income – income from a source inside the country – is taxed. In the residence-based 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 small number of countries also tax the worldwide income of their nonresident citizens in some cases.

Countries with a residence-based 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.

Individuals

The following table summarizes the taxation of local and foreign income of individuals, depending on their residence or citizenship in the country. It includes 244 entries: 194 sovereign countries, their 40 inhabited dependent territories (most of which have separate tax systems), and 10 countries with limited recognition. In the table, income includes any type of income received by individuals, such as work or investment income, and yes means that the country taxes at least one of these types.

Country or territory Taxes local
income of 		Taxes foreign
income of 		Notes and sources
Non-resident
individuals
Resident
citizens
Resident
foreigners
Resident
citizens
Resident
foreigners
Non-resident
citizens
 Antigua and Barbuda No No No No No No No personal income tax.[3][4]
 Bahamas No No No No No No No personal income tax.[5]
 Bahrain No No No No No No No personal income tax.[5]
 Brunei No No No No No No No personal income tax.[5]
 Cayman Islands No No No No No No No personal income tax.[5]
 Kuwait No No No No No No No personal income tax.[5]
 Maldives No No No No No No No personal income tax.[5]
 Monaco No No No No No No No personal income tax.[6]
 Nauru No No No No No No No personal income tax.[7]
 Oman No No No No No No No personal income tax.[5]
 Pitcairn Islands No No No No No No No personal income tax.[8]
 Qatar No No No No No No No personal income tax.[5]
 Saint Barthélemy No No No No No No No personal income tax.[9][Note 1]
 Saint Kitts and Nevis No No No No No No No personal income tax.[12]
 Turks and Caicos Islands No No No No No No No personal income tax.[13]
 United Arab Emirates No No No No No No No personal income tax.[5]
 Vanuatu No No No No No No No personal income tax.[14]
 Vatican City No No No No No No No personal income tax.[15]
 Wallis and Futuna No No No No No No No personal income tax.[16]
 Western Sahara No No No No No No No personal income tax.[17]
 Angola Yes Yes Yes No No No Territorial taxation.[5]
 Anguilla Yes Yes Yes No No No Territorial taxation.[18]
 Belize Yes Yes Yes No No No Territorial taxation.[19]
 Bermuda Yes Yes Yes No No No Territorial taxation.[5]
 Bhutan Yes Yes Yes No No No Territorial taxation.[20][21]
 Bolivia Yes Yes Yes No No No Territorial taxation.[22][23]
 Botswana Yes Yes Yes No No No Territorial taxation.[5]
 British Virgin Islands Yes Yes Yes No No No Territorial taxation.[5]
 Costa Rica Yes Yes Yes No No No Territorial taxation.[5]
 Democratic Republic of the Congo Yes Yes Yes No No No Territorial taxation.[5]
 Djibouti Yes Yes Yes No No No Territorial taxation.[24]
 Eswatini Yes Yes Yes No No No Territorial taxation.[5]
 Georgia Yes Yes Yes No No No Territorial taxation.[5]
 Guatemala Yes Yes Yes No No No Territorial taxation.[5]
 Guinea-Bissau Yes Yes Yes No No No Territorial taxation.[25][26]
 Hong Kong Yes Yes Yes No No No Territorial taxation.[5]
 Lebanon Yes Yes Yes No No No Territorial taxation.[5]
 Libya Yes Yes Yes No No No Territorial taxation.[5][27]
 Macau Yes Yes Yes No No No Territorial taxation.[5]
 Malawi Yes Yes Yes No No No Territorial taxation.[5]
 Malaysia Yes Yes Yes No No No Territorial taxation.[5]
 Marshall Islands Yes Yes Yes No No No Territorial taxation.[28]
 Micronesia Yes Yes Yes No No No Territorial taxation.[29]
 Namibia Yes Yes Yes No No No Territorial taxation.[5]
 Nicaragua Yes Yes Yes No No No Territorial taxation.[5]
 Palau Yes Yes Yes No No No Territorial taxation.[30]
 Palestinian Authority Yes Yes Yes No No No Territorial taxation.[5]
 Panama Yes Yes Yes No No No Territorial taxation.[5]
 Paraguay Yes Yes Yes No No No Territorial taxation.[5]
 Saint Helena, Ascension and Tristan da Cunha Yes Yes Yes No No No Territorial taxation.[31][32][33][Note 2]
 Seychelles Yes Yes Yes No No No Territorial taxation.[5]
 Singapore Yes Yes Yes No No No Territorial taxation.[5]
 Somalia Yes Yes Yes No No No Territorial taxation.[34]
 Syria Yes Yes Yes No No No Territorial taxation.[35]
 Tokelau Yes Yes Yes No No No Territorial taxation.[36]
 Tuvalu Yes Yes Yes No No No Territorial taxation.[37]
 Zambia Yes Yes Yes No No No Territorial taxation.[5]
 Iran Yes Yes Yes Yes No No Residence-based taxation of citizens, territorial taxation of foreigners.[38]
 Philippines Yes Yes Yes Yes No No Residence-based taxation of citizens, territorial taxation of foreigners.[5]
 Saudi Arabia Yes* Yes* Yes* Yes* No No Residence-based taxation of citizens, territorial taxation of foreigners.[5][Note 3]
* Only from business activities.
 North Korea Yes No Yes No Yes No Residence-based taxation of foreigners, territorial taxation of nonresident citizens.[39] Does not tax income of resident citizens.[40]
 Abkhazia Yes Yes Yes Yes Yes No Residence-based taxation.[41]
 Afghanistan Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Akrotiri and Dhekelia Yes Yes Yes Yes Yes No Residence-based taxation.[42]
 Albania Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Algeria Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 American Samoa Yes Yes Yes Yes Yes No Residence-based taxation.[43]
 Andorra Yes Yes Yes Yes Yes No Residence-based taxation.[44]
 Argentina Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Armenia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Artsakh Yes Yes Yes Yes Yes No Residence-based taxation.[45]
 Aruba Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Australia (including  Christmas Island,  Cocos Islands and  Norfolk Island[46][47]) Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Austria Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Azerbaijan Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Bangladesh Yes Yes Yes Yes Yes No Residence-based taxation.[48]
 Barbados Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Belarus Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Belgium Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Benin Yes Yes Yes Yes Yes No Residence-based taxation.[49]
 Bosnia and Herzegovina Yes Yes Yes Yes Yes No Residence-based taxation.[50][51][Note 4]
 Brazil Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Bulgaria Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Burkina Faso Yes Yes Yes Yes Yes No Residence-based taxation.[52]
 Burundi Yes Yes Yes Yes Yes No Residence-based taxation.[53]
 Cambodia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Cameroon Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Canada Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Cape Verde Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Central African Republic Yes Yes Yes Yes Yes No Residence-based taxation.[54]
 Chad Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Chile Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 China Yes Yes Yes Yes Yes No Residence-based taxation.[5][55][56]
 Colombia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Comoros Yes Yes Yes Yes Yes No Residence-based taxation.[57]
 Congo Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Cook Islands Yes Yes Yes Yes Yes No Residence-based taxation.[58]
 Croatia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Cuba Yes Yes Yes Yes Yes No Residence-based taxation.[59]
 Curaçao Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Cyprus Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Czech Republic Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Denmark Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Dominica Yes Yes Yes Yes Yes No Residence-based taxation.[60]
 Dominican Republic Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 East Timor Yes Yes Yes Yes Yes No Residence-based taxation.[61]
 Ecuador Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Egypt Yes Yes Yes Yes Yes No Residence-based taxation.[5][62][63]
 El Salvador Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Equatorial Guinea Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Estonia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Ethiopia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Falkland Islands Yes Yes Yes Yes Yes No Residence-based taxation.[64]
 Faroe Islands Yes Yes Yes Yes Yes No Residence-based taxation.[65]
 Fiji Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Finland (including  Åland[66]) Yes Yes Yes Yes Yes No* Residence-based taxation.[5]
* Except former residents, temporarily.[67]
 France (including overseas departments[10]) Yes Yes Yes Yes Yes No* Residence-based taxation.[5]
* Except in Monaco.[10]
 French Polynesia Yes Yes Yes Yes Yes No Residence-based taxation.[68]
 Gabon Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Gambia Yes Yes Yes Yes Yes No Residence-based taxation.[69]
 Germany Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Ghana Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Gibraltar Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Greece Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Greenland Yes Yes Yes Yes Yes No Residence-based taxation.[70]
 Grenada Yes Yes Yes Yes Yes No Residence-based taxation.[71]
 Guernsey Yes Yes Yes Yes Yes No Residence-based taxation.[5][Note 5]
 Guinea Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Guyana Yes Yes Yes Yes Yes No Residence-based taxation.[73][74]
 Haiti Yes Yes Yes Yes Yes No Residence-based taxation.[75]
 Honduras Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Iceland Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 India Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Indonesia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Iraq Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Ireland Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Isle of Man Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Israel Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Italy Yes Yes Yes Yes Yes No* Residence-based taxation.[5]
* Except in tax havens.[76]
 Ivory Coast Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Jamaica Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Japan Yes Yes Yes Yes Yes* No Residence-based taxation.[5]
* Only permanent residents.
 Jersey Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Jordan Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Kazakhstan Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Kenya Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Kiribati Yes Yes Yes Yes Yes No Residence-based taxation.[77]
 Kosovo Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Kyrgyzstan Yes Yes Yes Yes Yes No Residence-based taxation.[78]
 Laos Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Latvia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Lesotho Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Liberia Yes Yes Yes Yes Yes No Residence-based taxation.[79]
 Liechtenstein Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Lithuania Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Luxembourg Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Madagascar Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Mali Yes Yes Yes Yes Yes No Residence-based taxation.[80]
 Malta Yes Yes Yes Yes* Yes* No Residence-based taxation.[5]
* Only if domiciled in Malta or if the income is remitted to Malta.
 Mauritania Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Mauritius Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Mexico Yes Yes Yes Yes Yes No* Residence-based taxation.[5]
* Except in tax havens, temporarily.[81]
 Moldova Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Mongolia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Montenegro Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Montserrat Yes Yes Yes Yes Yes No Residence-based taxation.[82]
 Morocco Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Mozambique Yes Yes Yes Yes Yes No Residence-based taxation.[5]
   Nepal Yes Yes Yes Yes Yes No Residence-based taxation.[83]
 Netherlands (including the Caribbean Netherlands[5]) Yes Yes Yes Yes Yes No Residence-based taxation.[5][Note 6]
 New Caledonia Yes Yes Yes Yes Yes No Residence-based taxation.[84]
 New Zealand Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Niger Yes Yes Yes Yes Yes No Residence-based taxation.[85]
 Nigeria Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Niue Yes Yes Yes Yes Yes No Residence-based taxation.[86]
 North Macedonia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Northern Cyprus Yes Yes Yes Yes Yes No Residence-based taxation.[87]
 Norway Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Pakistan Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Papua New Guinea Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Peru Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Poland Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Portugal Yes Yes Yes Yes Yes No* Residence-based taxation.[5]
* Except in tax havens, temporarily.[88]
 Puerto Rico Yes Yes Yes Yes Yes No Residence-based taxation.[5][Note 7]
 Romania Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Russia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Rwanda Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Saint Lucia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Saint Martin Yes Yes Yes Yes Yes No Residence-based taxation.[89][Note 8]
 Saint Pierre and Miquelon Yes Yes Yes Yes Yes No Residence-based taxation.[91]
 Saint Vincent and the Grenadines Yes Yes Yes Yes Yes No Residence-based taxation.[92]
 Samoa Yes Yes Yes Yes Yes No Residence-based taxation.[93]
 San Marino Yes Yes Yes Yes Yes No Residence-based taxation.[94]
 São Tomé and Príncipe Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Senegal Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Serbia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Sierra Leone Yes Yes Yes Yes Yes No Residence-based taxation.[95]
 Sint Maarten Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Slovakia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Slovenia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Solomon Islands Yes Yes Yes Yes Yes No Residence-based taxation.[96]
 Somaliland Yes Yes Yes Yes Yes No Residence-based taxation.[97]
 South Africa Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 South Korea Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 South Ossetia Yes Yes Yes Yes Yes No Residence-based taxation.[98]
 South Sudan Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Spain Yes Yes Yes Yes Yes No* Residence-based taxation.[5]
* Except in tax havens, temporarily.[99]
 Sri Lanka Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Sudan Yes Yes Yes Yes Yes No Residence-based taxation.[100]
 Suriname Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Svalbard Yes Yes Yes Yes Yes No Residence-based taxation.[101]
 Sweden Yes Yes Yes Yes Yes No* Residence-based taxation.[5]
* Except former residents, temporarily.[102]
  Switzerland Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Taiwan Yes Yes Yes Yes Yes No Territorial taxation in general, but residence-based taxation under the alternative minimum tax.[5]
 Tajikistan Yes Yes Yes Yes Yes No Residence-based taxation.[103]
 Tanzania Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Thailand Yes Yes Yes Yes* Yes* No Residence-based taxation.[5]
* Only if the income is remitted to Thailand in the same year when it is earned.
 Togo Yes Yes Yes Yes Yes No Residence-based taxation.[104]
 Tonga Yes Yes Yes Yes Yes No Residence-based taxation.[105]
 Transnistria Yes Yes Yes Yes Yes No Residence-based taxation.[106]
 Trinidad and Tobago Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Tunisia Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Turkey Yes Yes Yes Yes Yes No* Residence-based taxation.[5]
* Except income not taxed by other countries of employees of Turkish government or companies.[107]
 Turkmenistan Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Uganda Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Ukraine Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 United Kingdom Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 United States Virgin Islands Yes Yes Yes Yes Yes No Residence-based taxation.[5][Note 9]
 Uruguay Yes Yes Yes Yes Yes No Territorial taxation in general, but residence-based taxation for certain investment income.[108][109][110]
 Uzbekistan Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Venezuela Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Vietnam Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Yemen Yes Yes Yes Yes Yes No Residence-based taxation.[111]
 Zimbabwe Yes Yes Yes Yes Yes No Residence-based taxation.[5]
 Eritrea Yes Yes Yes No No Yes Territorial and citizenship-based taxation.[112][113] Foreign income of nonresident citizens is taxed at a reduced flat rate.[114]
 Hungary Yes Yes Yes Yes Yes Yes* Residence-based and citizenship-based taxation. Nonresident citizens not satisfying exceptions are taxed in the same manner as residents.[5]
* Except dual nationals and residents of countries with tax treaties.[115]
 Myanmar Yes Yes Yes Yes Yes Yes Residence-based and citizenship-based taxation. Foreign income of nonresident citizens, except salaries, is taxed at a reduced flat rate.[5]
 United States (including  Guam and the  Northern Mariana Islands[43]) Yes Yes Yes Yes Yes Yes Residence-based and citizenship-based taxation. Nonresident citizens are taxed in the same manner as residents, but with a limited exemption for foreign income from work.[5][Note 10]

Residency

Taxing regimes are generally classified as either residence-based or territorial. Most jurisdictions tax income on a residency basis. They need to define "resident" and characterize the income of nonresidents. Such definitions vary by country and type of taxpayer, but usually involve the location of the person's main home and number of days the person is physically present in the country. Examples include:

  • The United States taxes its citizens as residents, and provides lengthy, detailed rules for individual residency of foreigners, covering:
    • periods establishing residency (including a formulary calculation involving three years);
    • start and end date of residency;
    • exceptions for transitory visits, medical conditions, etc.[116]
  • The United Kingdom, prior to 2013, established three categories: non-resident, resident, and resident but not ordinarily resident.[117] From 2013, the categories of resident are limited to non-resident and resident. Residency is established by application of the tests in the Statutory Residency Test.[118]
  • Switzerland residency may be established by having a permit to be employed in Switzerland for an individual who is so employed.[119]

Territorial systems usually tax local income regardless of the residence of the taxpayer. The key problem argued for this type of system is the ability to avoid taxation on portable income by moving it outside of the country. This has led governments to enact hybrid systems to recover lost revenue.

Citizenship

In the vast majority of countries, citizenship is completely irrelevant for taxation. Very few countries tax the foreign income of nonresident citizens in general:

  •  Hungary considers all of its nonresident citizens as tax residents, except those who hold another nationality. However, it does not tax the foreign income of those who reside in countries that have tax treaties with Hungary.[Note 11][115][127] Nonresident citizens who do not satisfy these exceptions are taxed in the same manner as residents, at a flat rate of 15% on worldwide income, in addition to mandatory contributions of up to 18.5% on certain types of income.[5] There is no minimum allowance or its equivalent in Hungary, meaning that all income is taxed. In this respect, Hungary is unique in Europe.[128]
  •  Myanmar taxes the foreign income, except salaries, of its nonresident citizens, at a reduced flat rate of 10% (general tax rates for residents are progressive from 5 to 25%).[5]
  •  The United States taxes the worldwide income of its nonresident citizens using the same tax rates as for residents. To mitigate double taxation, nonresident citizens may exclude some of their foreign income from work from U.S. taxation, and take credit for income tax paid to other countries, but they must file a U.S. tax return to claim the exclusion or credit even if they result in no tax liability.[129] "U.S. persons" abroad, like U.S. residents, are also subject to various reporting requirements regarding foreign finances, such as FBAR, FATCA, and IRS forms 3520, 5471, 8621 and 8938. The penalties for failure to file these forms on time are often much higher than the penalties for not paying the tax itself.[130][131][132][133]
Like Eritrea, enforcement tactics used by the U.S. government to facilitate tax compliance include the denial of U.S. passports to nonresident U.S. citizens deemed to be delinquent taxpayers and the potential seizure of any U.S. accounts and/or U.S.-based assets. The IRS can also exert substantial compliance pressure on nonresident citizens as a result of the FATCA legislation passed in 2010, which compels foreign banks to disclose U.S. account holders or face crippling fines on U.S.-related financial transactions. Unlike Eritrea, the U.S. has faced little international backlash related to its global enforcement tactics. For example, unlike their response to Eritrea's collection efforts, Canada and all EU member states have ratified intergovernmental agreements (IGAs) facilitating FATCA compliance and supporting the U.S. global tax regime in place for U.S. citizens (including dual nationals). The implementation of these IGAs has led to a substantial increase in U.S. citizenship renunciations since 2012, with wait times for renunciation appointments at the U.S. consulate in Toronto exceeding one year in early 2016.[134]
See also: Taxation of non-resident Americans and Taxation of United States persons

A few countries tax based on citizenship only in limited situations:

  •  Finland continues taxing its citizens who move from Finland to another country as residents of Finland, for the first three years after moving there, unless they demonstrate that they no longer have any ties to Finland. After this period, they are no longer considered residents of Finland for tax purposes.[67]
  •  France taxes its citizens who move to Monaco as residents of France, according to a treaty signed between the two countries in 1963.[10] However, those who already lived in Monaco since 1957, as well as those who were born in Monaco and have always lived there, are not subject to taxation as residents of France.[135][136]
  •  Italy continues taxing its citizens who move from Italy to a tax haven[Note 12] as residents of Italy, unless they demonstrate that they no longer have any ties to Italy.[76]
  •  Mexico continues taxing its citizens who move from Mexico to a tax haven[Note 13] as residents of Mexico, for the first three years after moving there. After this period, they are no longer considered residents of Mexico for tax purposes.[81]
  •  Portugal taxes its citizens who move to a tax haven[Note 14] as residents of Portugal, for the first five years after moving there. After this period, they are no longer considered residents of Portugal for tax purposes.[88]
  •  Spain continues taxing its citizens who move from Spain to a tax haven[Note 15] as residents of Spain, for the first five years after moving there. After this period, they are no longer considered residents of Spain for tax purposes.[99]
  •  Sweden continues taxing its citizens (as well as foreigners who lived there for at least ten years) who move from Sweden to another country as residents of Sweden, for the first five years after moving there, unless they demonstrate that they no longer have essential connections to Sweden. After this period, they are no longer considered residents of Sweden for tax purposes.[102]
  •  Turkey taxes its citizens who are residing abroad to work for the Turkish government or Turkish companies as residents of Turkey, but exempts their income that is already taxed by the country of origin.[107]

A few other countries used to tax the foreign income of nonresident citizens, but have abolished this practice:

  •  Romania used to tax the worldwide income of its citizens regardless of where they resided, but abandoned this practice some time between 1933 and 1954.[139][140]
  •  Mexico used to tax its citizens in the same manner as residents, on worldwide income. A new income tax law, passed in 1980 and effective 1981, determined only residence as the basis for taxation of worldwide income.[141] However, since 2006 Mexico taxes based on citizenship in limited situations (see above).[142]
  •  Bulgaria used to tax its citizens on worldwide income regardless of where they resided.[143] A new income tax law, passed in 1997 and effective 1998, determined residence as the basis for taxation of worldwide income.[144]
  •  The Philippines used to tax the foreign income of nonresident citizens at reduced rates of 1 to 3% (income tax rates for residents were 1 to 35% at the time).[145] It abolished this practice in a new revenue code in 1997, effective 1998.[146]
  •  Vietnam used to tax its citizens in the same manner as residents, on worldwide income. The country passed a personal income tax law in 2007, effective 2009, removing citizenship as a criterion to determine residence.[147]

In Iran, North Korea, the Philippines and Saudi Arabia, citizenship is relevant for the taxation of residents but not for nonresidents.

Other

There are some arrangements for international taxation that are not based on residency or citizenship:

  •  United Kingdom imposes global income tax on anyone who owes UK student loans. These are not true loans, but borrowings to be repaid through an additional 9% income tax, levied above a certain income threshold, until the balance of the loan expires in 30 years. The interest rate is expressed as a punitive addition to the UK Retail Price Index inflation rate (e.g. RPI + 3%), so the value of the loan cannot be inflated away. The loan cannot be repudiated by declaring bankruptcy. The income tax is imposed irrespective of citizenship or residency, which means the UK HMRC must track the location and income of all loan holders, wherever they are in the world, for several decades.

Corporations

Countries do not necessarily use the same system of taxation for individuals and corporations. For example, France uses a residence-based system for individuals but a territorial system for corporations,[148] while Singapore does the opposite,[149] and Brunei and Monaco taxes corporate but not personal income.[150][151]

Exclusion

Many systems provide for specific exclusions from taxable (chargeable) income. For example, several countries, notably the United States, Cyprus, Luxembourg, Netherlands and Spain, have enacted holding company regimes that exclude from income dividends from certain foreign subsidiaries of corporations. These systems generally impose tax on other sorts of income, such as interest or royalties, from the same subsidiaries. They also typically have requirements for portion and time of ownership in order to qualify for exclusion. The United States excludes dividends received by U.S. corporations from non-U.S. subsidiaries, as well as 50% of the deemed remittance of aggregate income of non-U.S. subsidiaries in excess of an aggregate 10% return on tangible depreciable assets. The Netherlands offers a "participation exemption" for dividends from subsidiaries of Netherlands companies. Dividends from all Dutch subsidiaries automatically qualify. For other dividends to qualify, the Dutch shareholder or affiliates must own at least 5% and the subsidiary must be subject to a certain level of income tax locally.[152]

Some countries, such as Singapore,[153] allow deferment of tax on foreign income of resident corporations until it is remitted to the country.

Individuals versus enterprises

Many tax systems tax individuals in one manner and entities that are not considered fiscally transparent in another. The differences may be as simple as differences in tax rates,[154] and are often motivated by concerns unique to either individuals or corporations. For example, many systems allow taxable income of an individual to be reduced by a fixed amount allowance for other persons supported by the individual (dependents). Such a concept is not relevant for enterprises.

Many systems allow for fiscal transparency of certain forms of enterprise. For example, most countries tax partners of a partnership, rather than the partnership itself, on income of the partnership.[155] A common feature of income taxation is imposition of a levy on certain enterprises in certain forms followed by an additional levy on owners of the enterprise upon distribution of such income. For example, the U.S. imposes two levels of tax on foreign individuals or foreign corporations who own a U.S. corporation. First, the U.S. corporation is subject to the regular income tax on its profits, then subject to an additional 30% tax on the dividends paid to foreign shareholders (the branch profits tax). The foreign corporation will be subject to U.S. income tax on its effectively connected income, and will also be subject to the branch profits tax on any of its profits not reinvested in the U.S.[citation needed] Thus, many countries tax corporations under company tax rules and tax individual shareholders upon corporate distributions. Various countries have tried (and some still maintain) attempts at partial or full "integration" of the enterprise and owner taxation. Where a two level system is present but allows for fiscal transparency of some entities, definitional issues become very important.

Source of income

Determining the source of income is of critical importance in a territorial system, as source often determines whether or not the income is taxed. For example, Hong Kong does not tax residents on dividend income received from a non-Hong Kong corporation.[156] Source of income is also important in residency systems that grant credits for taxes of other jurisdictions. Such credit is often limited either by jurisdiction or to the local tax on overall income from other jurisdictions.

Source of income is where the income is considered to arise under the relevant tax system. The manner of determining the source of income is generally dependent on the nature of income. Income from the performance of services (e.g., wages) is generally treated as arising where the services are performed.[157] Financing income (e.g., interest, dividends) is generally treated as arising where the user of the financing resides.[158][citation needed] Income related to use of tangible property (e.g., rents) is generally treated as arising where the property is situated.[159][citation needed] Income related to use of intangible property (e.g., royalties) is generally treated as arising where the property is used. Gains on sale of realty are generally treated as arising where the property is situated.

Gains from sale of tangible personal property are sourced differently in different jurisdictions. The U.S. treats such gains in three distinct manners: a) gain from sale of purchased inventory is sourced based on where title to the goods passes;[160] b) gain from sale of inventory produced by the person (or certain related persons) is sourced 50% based on title passage and 50% based on location of production and certain assets;[161] c) other gains are sourced based on the residence of the seller.[162]

In specific cases, the tax system may diverge for different categories of individuals. U.S. citizen and resident alien decedents are subject to estate tax on all of their assets, wherever situated. The nonresident aliens are subject to estate tax only on that part of the gross estate which at the time of death is situated in the U.S. Another significant distinction between U.S. citizens/RAs and NRAs is in the exemptions allowed in computing the tax liability.[163]

Where differing characterizations of an item of income can result in differing tax results, it is necessary to determine the characterization. Some systems have rules for resolving characterization issues, but in many cases resolution requires judicial intervention.[164] Note that some systems which allow a credit for foreign taxes source income by reference to foreign law.[165]

Definitions of income

Some jurisdictions tax net income as determined under financial accounting concepts of that jurisdiction, with few, if any, modifications.[citation needed] Other jurisdictions determine taxable income without regard to income reported in financial statements.[166] Some jurisdictions compute taxable income by reference to financial statement income with specific categories of adjustments, which can be significant.[167]

A jurisdiction relying on financial statement income tends to place reliance on the judgment of local accountants for determinations of income under locally accepted accounting principles. Often such jurisdictions have a requirement that financial statements be audited by registered accountants who must opine thereon.[168] Some jurisdictions extend the audit requirements to include opining on such tax issues as transfer pricing.[citation needed] Jurisdictions not relying on financial statement income must attempt to define principles of income and expense recognition, asset cost recovery, matching, and other concepts within the tax law. These definitional issues can become very complex. Some jurisdictions following this approach also require business taxpayers to provide a reconciliation of financial statement and taxable incomes.[169]

Deductions

Further information: Tax deduction

Systems that allow a tax deduction of expenses in computing taxable income must provide for rules for allocating such expenses between classes of income. Such classes may be taxable versus non-taxable, or may relate to computations of credits for taxes of other systems (foreign taxes). A system which does not provide such rules is subject to manipulation by potential taxpayers. The manner of allocation of expenses varies. U.S. rules provide for allocation of an expense to a class of income if the expense directly relates to such class, and apportionment of an expense related to multiple classes. Specific rules are provided for certain categories of more fungible expenses, such as interest.[170] By their nature, rules for allocation and apportionment of expenses may become complex. They may incorporate cost accounting or branch accounting principles,[170] or may define new principles.

Thin capitalization

Main article: Thin capitalization

Most jurisdictions provide that taxable income may be reduced by amounts expended as interest on loans. By contrast, most do not provide tax relief for distributions to owners.[171] Thus, an enterprise is motivated to finance its subsidiary enterprises through loans rather than capital. Many jurisdictions have adopted "thin capitalization" rules to limit such charges. Various approaches include limiting deductibility of interest expense to a portion of cash flow,[172] disallowing interest expense on debt in excess of a certain ratio,[citation needed] and other mechanisms.

Enterprise restructure

The organization or reorganization of portions of a multinational enterprise often gives rise to events that, absent rules to the contrary, may be taxable in a particular system. Most systems contain rules preventing recognition of income or loss from certain types of such events. In the simplest form, contribution of business assets to a subsidiary enterprise may, in certain circumstances, be treated as a nontaxable event.[173] Rules on structuring and restructuring tend to be highly complex.

Credits for taxes of other jurisdictions

Further information: Tax credit and Foreign tax credit

Systems that tax income from outside the system's jurisdiction tend to provide for a unilateral credit or offset for taxes paid to other jurisdictions. Such other jurisdiction taxes are generally referred to within the system as "foreign" taxes. Tax treaties often require this credit. A credit for foreign taxes is subject to manipulation by planners if there are no limits, or weak limits, on such credit. Generally, the credit is at least limited to the tax within the system that the taxpayer would pay on income from outside the jurisdiction.[174] The credit may be limited by category of income,[175] by other jurisdiction or country, based on an effective tax rate, or otherwise. Where the foreign tax credit is limited, such limitation may involve computation of taxable income from other jurisdictions. Such computations tend to rely heavily on the source of income and allocation of expense rules of the system.[176]

Withholding tax

Further information: Withholding tax

Many jurisdictions require persons paying amounts to nonresidents to collect tax due from a nonresident with respect to certain income by withholding such tax from such payments and remitting the tax to the government.[177] Such levies are generally referred to as withholding taxes. These requirements are induced because of potential difficulties in collection of the tax from nonresidents. Withholding taxes are often imposed at rates differing from the prevailing income tax rates.[178] Further, the rate of withholding may vary by type of income or type of recipient.[179][180] Generally, withholding taxes are reduced or eliminated under income tax treaties (see below). Generally, withholding taxes are imposed on the gross amount of income, unreduced by expenses.[181] Such taxation provides for great simplicity of administration but can also reduce the taxpayer's awareness of the amount of tax being collected.[182]

Treaties

Main article: Tax treaty
  OECD members
  Accession candidate countries
  Enhanced engagement countries
Ratio of German assets in tax havens to German GDP, 1996–2008.[183] Havens in countries with tax information sharing allowing for compliance enforcement have been in decline. The "Big 7" shown are Hong Kong, Ireland, Lebanon, Liberia, Panama, Singapore, and Switzerland.

Tax treaties exist between many countries on a bilateral basis to prevent double taxation (taxes levied twice on the same income, profit, capital gain, inheritance or other item). In some countries they are also known as double taxation agreements, double tax treaties, or tax information exchange agreements (TIEA).

Most developed countries have a large number of tax treaties, while developing countries are less well represented in the worldwide tax treaty network.[184] The United Kingdom has treaties with more than 110 countries and territories. The United States has treaties with 56 countries (as of February 2007). Tax treaties tend not to exist, or to be of limited application, when either party regards the other as a tax haven. There are a number of model tax treaties published by various national and international bodies, such as the United Nations and the OECD.[185]

Treaties tend to provide reduced rates of taxation on dividends, interest, and royalties. They tend to impose limits on each treaty country in taxing business profits, permitting taxation only in the presence of a permanent establishment in the country.[186] Treaties tend to impose limits on taxation of salaries and other income for performance of services. They also tend to have "tie breaker" clauses for resolving conflicts between residency rules. Nearly all treaties have at least skeletal mechanisms for resolving disputes, generally negotiated between the "competent authority" section of each country's taxing authority.

Anti-deferral measures

Residency systems may provide that residents are not subject to tax on income outside the jurisdiction until that income is remitted to the jurisdiction.[187] Taxpayers in such systems have significant incentives to shift income outside its borders. Depending on the rules of the system, the shifting may occur by changing the location of activities generating income or by shifting income to separate enterprises owned by the taxpayer. Most residency systems have avoided rules which permit deferring income from outside its borders without shifting it to a subsidiary enterprise due to the potential for manipulation of such rules. Where owners of an enterprise are taxed separately from the enterprise, portable income may be shifted from a taxpayer to a subsidiary enterprise to accomplish deferral or elimination of tax. Such systems tend to have rules to limit such deferral through controlled foreign corporations. Several different approaches have been used by countries for their anti-deferral rules.[188]

In the United States, rules provides that U.S. shareholders of a Controlled Foreign Corporation (CFC) must include their shares of income or investment of E&P by the CFC in U.S. property.[189] U.S. shareholders are U.S. persons owning 10% or more (after the application of complex attribution of ownership rules) of a foreign corporation. Such persons may include individuals, corporations, partnerships, trusts, estates, and other juridical persons. A CFC is a foreign corporation more than 50% owned by U.S. shareholders. This income includes several categories of portable income, including most investment income, certain resale income, and certain services income. Certain exceptions apply, including the exclusion from Subpart F income of CFC income subject to an effective foreign tax rate of 90% or more of the top U.S. tax rate.[189]

The United Kingdom provides that a UK company is taxed currently on the income of its controlled subsidiary companies managed and controlled outside the UK which are subject to "low" foreign taxes.[190] Low tax is determined as actual tax of less than three-fourths of the corresponding UK tax that would be due on the income determined under UK principles. Complexities arise in computing the corresponding UK tax. Further, there are certain exceptions which may permit deferral, including a "white list" of permitted countries and a 90% earnings distribution policy of the controlled company. Further, anti-deferral does not apply where there is no tax avoidance motive.[191]

Rules in Germany provide that a German individual or company shareholder of a foreign corporation may be subject to current German tax on certain passive income received by the foreign corporation. This provision applies if the foreign corporation is taxed at less than 25% of the passive income, as defined.[citation needed] Japan and some other countries have followed a "black list" approach, where income of subsidiaries in countries identified as tax havens is subject to current tax to the shareholder. Sweden has adopted a "white list" of countries in which subsidiaries may be organized so that the shareholder is not subject to current tax.

Transfer pricing

Main article: Transfer pricing

The setting of the amount of related party charges is commonly referred to as transfer pricing. Many jurisdictions have become sensitive to the potential for shifting profits with transfer pricing, and have adopted rules regulating setting or testing of prices or allowance of deductions or inclusion of income for related party transactions. Many jurisdictions have adopted broadly similar transfer pricing rules. The OECD has adopted (subject to specific country reservations) fairly comprehensive guidelines.[192] These guidelines have been adopted with little modification by many countries.[193] Notably, the U.S. and Canada have adopted rules which depart in some material respects from OECD guidelines, generally by providing more detailed rules.

Arm's length principle: It is a key concept of most transfer pricing rules, that prices charged between related enterprises should be those which would be charged between unrelated parties dealing at arm's length. Most sets of rules prescribe methods for testing whether prices charged should be considered to meet this standard. Such rules generally involve comparison of related party transactions to similar transactions of unrelated parties (comparable prices or transactions). Various surrogates for such transactions may be allowed. Most guidelines allow the following methods for testing prices: Comparable uncontrolled transaction prices, resale prices based on comparable markups, cost plus a markup, and an enterprise profitability method.

Tax avoidance

Tax avoidance schemes may take advantage of low or no-income tax countries known as tax havens. Corporations may choose to move their headquarters to a country with more favorable tax environments. In countries where movement has been restricted by legislation, it might be necessary to reincorporate into a low-tax company through reversing a merger with a foreign corporation ("inversion" similar to a reverse merger). In addition, transfer pricing may allow for "earnings stripping" as profits are attributed to subsidiaries in low-tax countries.[194]

For individuals tax avoidance has become a major issue for governments worldwide since the 2008 recession. These tax directives began when the United States introduced the Foreign Account Tax Compliance Act (FATCA) in 2010, and were greatly expanded by the work of The Organisation for Economic Co-operation and Development (OECD). The OECD introduced a new international system for the automatic exchange of tax information – known as the Common Reporting Standard (CRS) – to which around 100 countries have committed. For some taxpayers, the CRS is already “live”; for others it is imminent. The goal of this worldwide exchange of tax information is tax transparency, and has aroused concerns about privacy and data breaches due to the sheer volume of information that is going to be exchanged.[195][196]

Expanded Worldwide Planning (EWP) is an element of international taxation created in the wake of tax directives from government tax authorities after the worldwide recession beginning in 2008. At the heart of EWP is a properly constructed Private placement life insurance (PPLI) policy that allows taxpayers to use the regulatory framework of life insurance to structure their assets. These assets can be located anywhere in the world and at the same time can be brought into compliance with tax authorities worldwide. EWP also brings asset protection and privacy benefits that are set forward in the six principals of EWP.

See also

Notes

  1. ^ New residents of Saint Barthélemy are considered residents of France for tax purposes, for the first five years after moving there.[10] After this period, they become residents of Saint Barthélemy for tax purposes.[11]
  2. ^ Saint Helena, Ascension Island and Tristan da Cunha are separate tax jurisdictions. All of them tax only local income.
  3. ^ Saudi Arabia taxes the local business income of its residents who are not citizens of Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) and of nonresidents. It also imposes zakat on the worldwide business income and assets of its residents who are citizens of Gulf Cooperation Council countries. Saudi Arabia does not impose tax or zakat on income or assets that are not related to business activities.
  4. ^ The Federation of Bosnia and Herzegovina, Republika Srpska and Brčko District are separate tax jurisdictions. All of them tax worldwide income of residents and local income of nonresidents.
  5. ^ Guernsey and Alderney form one tax jurisdiction, which taxes worldwide income of residents and local income of nonresidents. Sark is a separate tax jurisdiction, which does not tax income but taxes worldwide assets of residents and local assets of nonresidents.[72]
  6. ^ The European and Caribbean Netherlands are separate tax jurisdictions. Both tax worldwide income of residents and local income of nonresidents.
  7. ^ Puerto Rico does not tax foreign income of nonresident citizens. However, Puerto Rican citizens are also United States citizens, and the United States taxes their worldwide income regardless of where they live.
  8. ^ Residents of France who move to Saint Martin are not considered residents of Saint Martin for tax purposes, and continue to be taxed as residents of France, for the first five years after moving there.[10] After this period, they become residents of Saint Martin for tax purposes.[90]
  9. ^ The United States Virgin Islands do not tax foreign income of nonresident citizens. However, citizens of the United States Virgin Islands are also United States citizens, and the United States taxes their worldwide income regardless of where they live.
  10. ^ Guam and the Northern Mariana Islands use the same income tax code as the United States, but each territory administers it separately. In the case of nonresident citizens, individuals who acquired United States citizenship by a connection to Guam or the Northern Mariana Islands are taxed by the respective territory, instead of by the United States.[43]
  11. ^ As of 2019, Hungary has tax treaties with the following countries and territories: Albania, Armenia, Australia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hong Kong, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Kazakhstan, Kosovo, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Netherlands, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Vietnam.[126]
  12. ^ As of 2018, the following countries and territories are considered tax havens by Italy: Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Brunei, Caribbean Netherlands (Bonaire, Saba, Sint Eustatius), Cayman Islands, Cook Islands, Costa Rica, Curaçao, Djibouti, Dominica, Ecuador, French Polynesia, Gibraltar, Grenada, Guernsey (including Alderney and Sark), Hong Kong, Isle of Man, Jersey, Lebanon, Liberia, Liechtenstein, Macau, Malaysia, Maldives, Marshall Islands, Mauritius, Monaco, Montserrat, Nauru, Niue, Oman, Panama, Philippines, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, Seychelles, Singapore, Sint Maarten, Switzerland, Taiwan, Tonga, Turks and Caicos Islands, Tuvalu, United Arab Emirates, Uruguay, Vanuatu.[76]
  13. ^ This provision applies to income whose tax in the new country of residence is lower than 75% of the tax that the person would have paid as a resident of Mexico.[137] However, the provision does not apply if the country has a treaty to share tax information with Mexico.
  14. ^ As of 2018, the following countries and territories are considered tax havens by Portugal: American Samoa, Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda, Bolivia, British Virgin Islands, Brunei, Caribbean Netherlands (Bonaire, Saba, Sint Eustatius), Cayman Islands, Christmas Island, Cocos Islands, Cook Islands, Costa Rica, Curaçao, Djibouti, Dominica, Falkland Islands, Fiji, French Polynesia, Gambia, Gibraltar, Grenada, Guam, Guernsey (including Alderney and Sark), Guyana, Honduras, Hong Kong, Isle of Man, Jamaica, Jersey, Jordan, Kiribati, Kuwait, Labuan, Lebanon, Liberia, Liechtenstein, Maldives, Marshall Islands, Mauritius, Monaco, Montserrat, Nauru, Niue, Norfolk Island, Northern Mariana Islands, Oman, Palau, Panama, Pitcairn Islands, Puerto Rico, Qatar, Qeshm, Saint Helena, Ascension and Tristan da Cunha, Saint Kitts and Nevis, Saint Lucia, Saint Pierre and Miquelon, Saint Vincent and the Grenadines, Samoa, San Marino, Seychelles, Sint Maarten, Solomon Islands, Svalbard, Swaziland, Tokelau, Tonga, Trinidad and Tobago, Turks and Caicos Islands, Tuvalu, United Arab Emirates, United States Virgin Islands, Uruguay, Vanuatu, Yemen, and other Pacific islands (Micronesia, New Caledonia, Wallis and Futuna).[138]
  15. ^ As of 2018, the following countries and territories are considered tax havens by Spain: Anguilla, Antigua and Barbuda, Bahrain, Bermuda, British Virgin Islands, Brunei, Cayman Islands, Cook Islands, Dominica, Falkland Islands, Fiji, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Jordan, Lebanon, Liberia, Liechtenstein, Macau, Mauritius, Monaco, Montserrat, Nauru, Northern Mariana Islands, Saint Lucia, Saint Vincent and the Grenadines, Seychelles, Solomon Islands, Turks and Caicos Islands, United States Virgin Islands, Vanuatu.[99]

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  85. ^ General Tax Code, General Direction of Taxes of Niger, November 2015.
  86. ^ Income Tax Act 1961, Pacific Islands Legal Information Institute.
  87. ^ Income Tax Act, Ministry of Finance, Revenue and Tax Administration of the Turkish Republic of Northern Cyprus, 2010. Template:Tr icon
  88. ^ a b Personal income tax code, Tax and Customs Authority of Portugal. Template:Pt icon
  89. ^ General tax code of the Collectivity of Saint Martin, Collectivity of Saint Martin, January 1, 2012. Template:Fr icon
  90. ^ General code of territorial collectivities, Legifrance, July 26, 2012. Template:Fr icon
  91. ^ Instructions to fill in your tax return, Administration of Fiscal Services of Saint Pierre and Miquelon. Template:Fr icon
  92. ^ St. Vincent and the Grenadines Highlights 2017, Deloitte.
  93. ^ Income Tax Act 1974, Pacific Islands Legal Information Institute.
  94. ^ General income tax, Grand and General Council of San Marino, 16 December 2013. Template:It icon
  95. ^ Income Tax Act 2000, National Revenue Authority of Sierra Leone, 2015.
  96. ^ 2008 Income Tax Guide, Inland Revenue Division of the Solomon Islands.
  97. ^ Somaliland Inland Revenue Law No. 72/2016, Republic of Somaliland. Template:So icon
  98. ^ Law on the income tax on individuals, Zakon.kz. Template:Ru icon
  99. ^ a b c Taxation of nonresidents, Tax Agency of Spain, 22 January 2018. Template:Es icon
  100. ^ Sudan Highlights 2012, Deloitte.
  101. ^ Law on tax in Svalbard, Lovdata, August 10, 2012. Template:No icon
  102. ^ a b Unlimited tax liability Sweden, Nordisk eTax.
  103. ^ Tax Code of the Republic of Tajikistan, State Committee on Investments and State Property Management of the Republic of Tajikistan.
  104. ^ Tax assessment, liquidation and control, eRegulations Togo. Template:Fr icon
  105. ^ Income Tax Act, Pacific Islands Legal Information Institute.
  106. ^ Law on the income tax on individuals, Law of Pridnestrovian Moldavian Republic, September 30, 2000. Template:Ru icon
  107. ^ a b Income Tax Law, Revenue Administration of Turkey. Template:Tr icon
  108. ^ What comprises the spatial aspect of the generating event in the personal income tax?, General Directorate of Taxes of Uruguay, 28 November 2016. Template:Es icon
  109. ^ Worldwide Personal Tax and Immigration Guide 2018-19, Ernst & Young, November 2018.
  110. ^ Uruguay Highlights 2018, Deloitte.
  111. ^ Yemen Highlights 2017, Deloitte.
  112. ^ a b A proclamation to provide for payment of income tax, Economic and Commercial Counsellor's Office of the Embassy of the People's Republic of China in Eritrea, July 24, 2008.
  113. ^ State of Eritrea Tax Summary, PricewaterhouseCoopers, 2014.
  114. ^ a b The 2% tax for Eritreans in the diaspora, DSP-groep, June 2017.
  115. ^ a b Individual taxation of foreign-source income and social contribution obligations, National Tax and Customs Administration of Hungary, 2019. Template:Hu icon
  116. ^ See, e.g., "Tax Information for Visitors to the United States", Publication 513 (annual), Internal Revenue Service, U.S. Department of Treasury, page 2.
  117. ^ See, e.g., "Residents and non-residents", IR20, Inland Revenue, HMRC, page 6 et seq.
  118. ^ "RDR3: Statutory Residence Test - Publications - GOV.UK". www.gov.uk. Retrieved 2016-02-18.
  119. ^ Switzerland requires a work permit to be employed in Switzerland. A person working in Switzerland for more than 30 days may be a resident. See http://www.taxation.ch/index.cfm/fuseaction/show/temp/default/path/1-534.htm
  120. ^ A form of extortion – Eritrea's 2% Diaspora tax, Daniel Berhane, November 20, 2011.
  121. ^ Security Council, by Vote of 13 in Favour, Adopts Resolution Reinforcing Sanctions Regime against Eritrea 'Calibrated' to Halt All Activities Destabilizing Region, United Nations, December 5, 2011.
  122. ^ Canada expels Eritrea envoy over expat fees claims, BBC, May 29, 2013.
  123. ^ The Netherlands expels Eritrea's top diplomat over 'diaspora tax' enforcement, Deutsche Welle, 17 January 2018.
  124. ^ Riksdag wants to halt Eritrean exile taxes, The Local, February 24, 2012.
  125. ^ European Parliament resolution of 6 July 2017 on Eritrea, notably the cases of Abune Antonios and Dawit Isaak, European Parliament, 6 July 2017.
  126. ^ Double taxation treaties of Hungary, National Tax and Customs Administration of Hungary, 1 January 2019.
  127. ^ Hungary Now Imposes Tax on Non-Resident Citizens, The Nestmann Group, October 2, 2012.
  128. ^ Top Individual Income Tax Rates in Europe, Tax Foundation, 22 February 2019.
  129. ^ Information for U.S. Citizens or Dual Citizens Residing Outside the U.S., Retrieved November 28, 2013
  130. ^ Despite FATCA, FBAR Penalties Still Under Fire Forbes, March 12, 2012.
  131. ^ FBARs & FATCA Form 8938: Maddening Duplication?, Forbes, April 10, 2012.
  132. ^ FBAR Penalties: When Will IRS Let You Off With A Warning?, Forbes, June 4, 2012.
  133. ^ http://americansabroad.org/files/1413/7848/1535/harvey_2013.pdf
  134. ^ Delays, costs mount for Canadians renouncing U.S. citizenship, The Globe and Mail, 9 February 2016.
  135. ^ Article Monaco Matin of April 18, 2014, on the subject of ruling no. 362237 of the Conseil d'État, Union des Français de l'Etranger, 18 April 2014. Template:Fr icon
  136. ^ Response regarding the certificate of domicile, General Administration of Public Finances of France, 16 April 2015. Template:Fr icon
  137. ^ Income Tax Law, Chamber of Deputies of Mexico, effective 18 November 2015. Template:Es icon
  138. ^ Ordinance no. 150/2004, Diário da República, 29 December 2017. Template:Pt icon
  139. ^ Law no. 88/1933 for the unification of direct contributions and for the establishment of tax on global income, Lege5. Template:Ro icon
  140. ^ Decree no. 153 of 11 May 1954 regarding the tax on income of the population, Chamber of Deputies of Romania. Template:Ro icon
  141. ^ The income tax on resident individuals, in Mexico and Spain (generalities), National Autonomous University of Mexico. Template:Es icon
  142. ^ Decree to reform, add, repeal and establish various provisions of the Tax Code of the Federation, of the Income Tax Law, of the Value-Added Tax Law and of the Law of the Special Tax on Production and Services, Chamber of Deputies of Mexico, 28 June 2006. Template:Es icon
  143. ^ Personal income tax act, United Nations Public Administration Network.
  144. ^ Law of income taxes on natural persons, Constitutional Court of Bulgaria. Template:Bg icon
  145. ^ An act amending certain provisions of the National Internal Revenue Code of 1977 as amended, and for other purposes, PhilippineLaw.info.
  146. ^ National Internal Revenue Code, Bureau of Internal Revenue of the Philippines.
  147. ^ Vietnam: Law on Personal Income Tax, Library of Congress.
  148. ^ International tax - France Highlights 2012, Deloitte.
  149. ^ International tax - Singapore Highlights 2012, Deloitte.
  150. ^ "International tax - Brunei Darussalam Highlights 2012" (PDF). deloitte.com. Deloitte.
  151. ^ Monaco might not charge residents income tax, but it's no tax haven.
  152. ^ The rules have changed over the years. For a good explanation of the 2006 changes by a major UK law firm, see http://www.freshfields.com/publications/pdfs/2006/corp-tax-reform.pdf.
  153. ^ "What is taxable income", Inland Revenue Authority of Singapore.
  154. ^ The U.S. taxes businesses generally at rates from 15% to 35%. However, the graduated rates for individuals are different from those for corporations. United States Code Title 26 sections 1 and 11, hereafter 26 USC 1 and 11
  155. ^ E.g., 26 USC 701, et seq.
  156. ^ "www.gov.hk/en/residents/taxes/salaries/salariestax/exemption/employee.htm".
  157. ^ Supra. 26 USC 861(a)(3)
  158. ^ 26 USC 861(a)(1) and (2) and 862(a)(1) and (2), supra.
  159. ^ U.S. IRC sections 861(a)(4) and 862(a)(4), supra.
  160. ^ 26 USC 861(a)(6) and 862(a)(6), supra.)
  161. ^ 26 USC 863(b).
  162. ^ 26 USC 865(a). (other examples needed)
  163. ^ Robert F. Klueger (2012). "Overview of International Estate Planning" (PDF). Valley Lawyer. Archived from the original (PDF) on July 26, 2014. Retrieved June 26, 2014.
  164. ^ See, e.g., Pierre Boulez, in which a U.S. court determined that income received by a performer relating to sale of recordings of a musical performance was sourced to where such recordings were purchased by consumers.
  165. ^ See, e.g., India’s rules
  166. ^ The U.S. and many of its states define taxable income independently of financial statement income, but require reconciliation of the two. See, e.g., California Revenue and Taxation Code sections 17071 et seq.
  167. ^ "www.cra-arc.gc.ca/E/pbg/tf/t2sch1/t2sch1-08e.pdf" (PDF).
  168. ^ "Auditors - GBA4".
  169. ^ "U.S. IRS Form 1120 Schedule M-3" (PDF). irs.gov.
  170. ^ a b U.S. regulations under 26 CFR 1.861-8, et seq. at (hereafter U.S. regulations §)
  171. ^ Contrast to "integrated" systems providing a credit to enterprise owners for a portion of enterprise level taxation.[citation needed]
  172. ^ 26 USC 163(j) and long proposed regulations thereunder
  173. ^ 26 USC 351.
  174. ^ E.g., Egypt limits the credit to the Egyptian income tax "that may have been payable with respect to profits from works performed abroad," but without a thorough definition of terms. Article (54).
  175. ^ U.S. rules limit the credit by categories based on the nature of the income. 26 USC 904. For 20 years prior to changes first effective in 2007, there were at least nine such categories. These included, e.g., financial services income, high-taxed income, other passive income, and other (operating or general) income. UK rules provide for separate limitations based on the schedule of income on which UK tax is computed. Thus, credits were separately limited for salaries versus dividends and interest.
  176. ^ E.g., under U.S. rules, the credit is limited to U.S. tax on foreign source taxable income for a particular category. The rules for determining source for taxation of foreign persons (sections 861-865) apply in computing such credit, and detailed rules are provided in regulations (above) for allocating and apportioning expenses to such income.
  177. ^ Materials from one major accounting firm provide a table of over sixty such countries. Such table is not comprehensive.
  178. ^ E.g., Australia imposes a 10% withholding tax rate on interest, subject to treaty reduction.
  179. ^ E.g., Thailand taxes dividends at 10% and interest at 15%.
  180. ^ E.g., Italy taxes dividends paid to nonresidents having voting rights in the company paying the dividends at 27% but taxes dividends paid to nonresidents not having such rights at 12.5%.
  181. ^ See, e.g., 26 USC 871, 881, and 1441.
  182. ^ "History of the U.S. Tax System". U.S. Department of Treasury. Archived from the original on 2010-11-27. Retrieved 2006-10-31.
  183. ^ Shafik Hebous (2011) "Money at the Docks of Tax Havens: A Guide", CESifo Working Paper Series No. 3587, p. 9
  184. ^ Christians, Allison (April 2005). "Tax Treaties for Investment and Aid to Sub-Saharan Africa: A Case Study". Northwestern Public Law Research Paper No. 05-10; Northwestern Law & Econ Research Paper No. 05-15. SSRN 705541.
  185. ^ "Model Tax Convention on Income and on Capital 2014". OECD. October 30, 2015. Retrieved 2016-08-15.
  186. ^ Permanent establishment is defined under most treaties using language identical to the OECD model. Generally, a permanent establishment is any fixed place of business, including an office, warehouse, etc.
  187. ^ See, for example, Singapore's provision that income from outside its borders is not taxed until brought onshore.
  188. ^ Anti-deferral and other shifting measures have also been combatted by granting broad powers to revenue authorities under "general anti-avoidance" provisions. See a discussion of Canadian GAAR a CTF article.
  189. ^ a b Subpart F (sections 951-964)
  190. ^ Part XVII of Chapter IV ICTA 1988. For a discussion of the attributes and history of management and control as a test for corporate residency see Charles Edward Andrew Lincoln IV, Is Incorporation Really Better Than Central Management and Control for Testing Corporate Residency? An Answer to Corporate Tax Evasion and Inversion, 43 Ohio N.U.L. Rev. 359 (2017).
  191. ^ "INTM200000 - International Manual - HMRC internal manual - GOV.UK". hmrc.gov.uk.
  192. ^ "Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations".
  193. ^ E.g., UK ICTA Section 28AA and guidelines thereunder
  194. ^ U.S. Department of the Treasury. (2007). Earnings Stripping, Transfer Pricing and U.S. Income Tax Treaties.
  195. ^ Knight, Andrew (23 November 2016). ""Is there room for privacy planning in a tax-transparent world?"". International Investment.
  196. ^ Garnham, Caroline (22 July 2016). ""HNWIs, FATCA & CRS: Is Privacy Dead?"". Private Client Hub.

Further reading

  • Malherbe, Philippe, Elements of International Income Taxation, Bruylant (2015)
  • Thuronyi, Victor, Kim Brooks, and Borbala Kolozs, Comparative Tax Law, Wolters Kluwer Publishers (2d ed. 2016)
  • Lymer, Andrew and Hasseldine, John, eds., The International Taxation System, Kluwer Academic Publishers (2002)
  • Kuntz, Joel D. and Peroni, Robert J.; U.S. International Taxation
  • International Bureau of Fiscal Documentation offers subscription services detailing taxation systems of most countries, as well as comprehensive tax treaties, in multiple languages. Also available and searchable by subscription through Thomson subsidiaries.
  • CCH offers shorter descriptions for fewer countries (at a lower fee) as well as certain computational tools.
  • At least six international accounting firms (BDO, Deloitte, Ernst & Young, Grant Thornton, KPMG, and PriceWaterhouseCoopers) and several law firms have individual country and multi-country guides available, often to non-clients. See the in-country web sites for each for contact information

External links

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