Q/A What is the difference between taxation at source and taxation on a worldwide basis?
On the basis of the source principle (we also speak in this regard of taxation on a territorial basis or taxation at source), all earnings obtained in the territory of a given country are subject to taxation, regardless of whether they are earnings of residents or not.
On the basis of the principle of taxation on a worldwide basis, on the other hand, all the earnings of fiscally resident subjects in the country are taxed, wherever they are obtained in the world.
In these cases, the power of the State to tax you exceeds national limits, and pursues you everywhere in the world.
However, tax residence change procedures allow you to take that power away from the State.
Some tax systems, such as the United States, apply the principle of taxation on a worldwide basis, but with citizenship and not residence as a determining factor, for the purposes of taxing income wherever produced.
The majority of European countries, on the other hand, adopted the first two criteria mentioned above at the same time, albeit with slight and corrective differences between various States.
The interaction between these criteria can give rise to the unfortunate international double taxation, in which the same earnings are taxed several times by different countries, which can be avoided by an international tax lawyer with proper tax planning.
If you need specific advice, you can contact us.
Remember that laws change all the time; therefore it is essential to check the law in force when you decide to relocate or move abroad.
It is very important that you speak to your international tax attorney before starting any type of tax planning or relocation of your business.
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