Worldwide or territorial approach for individual income tax : which is more prevalent?
Document Type
Journal article
Source Publication
Journal of Modern Accounting and Auditing
Publication Date
4-2017
Volume
13
Issue
4
First Page
137
Last Page
151
Publisher
David Publishing Co., Inc.
Keywords
individual income tax, global individual income tax, worldwide/territorial income approach
Abstract
For individuals who are contemplating relocating, how their income will be taxed might be an important factor when deciding whether or not to take up residence in another country. Two income approaches are commonly used around the globe. Worldwide income approach (also known as a global tax system) taxes income from whatever source derived. Territorial income approach taxes only income earned within the country’s borders. Using information collected from PricewaterhouseCoopers’ website1 that provides information on tax systems used in countries around the world, this paper examines which countries apply worldwide or global income approach and which employ territorial approach to determine the legitimate source of taxable income. The research focuses on countries within: (1) Americas; (2) Asia/Pacific Basin; (3) Europe; and (4) Africa/Middle and Near East. Based on the information collected and presented in this paper, the worldwide approach is much more prevalent (104 countries) than the territorial approach (30 countries). This paper also investigates any specific rules that a particular country has in relation to income to be taxed and residency versus non-residency status of the taxpayers. There appears to be an abundant spectrum of rules relating to residency and domicile for tax purposes among the countries.
DOI
10.17265/1548-6583/2017.04.001
Print ISSN
15486583
E-ISSN
19359683
Publisher Statement
Coryright © 2017 David Publishing Company. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Shum, C., Fay, J., & Lui, G. (2017). Worldwide or territorial approach for individual income tax: Which is more prevalent? Journal of Modern Accounting and Auditing, 13(4), 137-151. doi: 10.17265/1548-6583/2017.04.001