Glossary
Territorial taxation
A tax system that taxes only income earned inside the country; foreign-source income is not taxed.
Under territorial taxation, a country taxes income sourced within its borders but ignores income earned abroad. For a location-independent earner with foreign clients, this can mean a 0% effective rate on that income.
Why it matters
Countries like Panama, Paraguay, Georgia and Costa Rica use territorial systems, making them popular, accessible bases. It contrasts with worldwide taxation. See tax residency in Panama.
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