Page 7 - International Taxation IRS Training Guides
P. 7
Tax Systems Overview
In a worldwide system of
taxation, a jurisdiction
on its residents on all income earned
imposes tax
both at home or abroad. Double taxation is mitigated
by foreign tax credits (FTCs).
Taxpayers may pay
tax on foreign income if the foreign tax rate is
residual
less than the domestic tax rate.
In a territorial system of
taxation, a jurisdiction
only on income earned at home. The
imposes tax
hallmark of
territoriality is a participation exemption, or
dividends
received deduction (DRD), for foreign
dividends.
No domestic tax on foreign income.
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