Worldwide Tax System

Worldwide Tax System refers to a taxation framework where a country’s tax laws apply to its residents and citizens regardless of where their income is earned globally. Under this system, taxpayers are required to report and pay taxes on their worldwide income, which can include wages, dividends, and interest from foreign sources.

In contrast to a territorial tax system, which only taxes income earned within the country’s borders, a worldwide tax system often allows for credits or exemptions for taxes paid to foreign governments, helping to mitigate double taxation. An example is the United States, where citizens and residents must report their global income and can claim foreign tax credits to offset their U.S. tax liability.