Territorial Tax Systems

What territorial means

A territorial tax system taxes only income with a source inside the country. Income earned abroad — overseas salary, foreign business profits, offshore investment returns — generally falls outside the tax net.

Leading territorial jurisdictions

• Singapore — territorial; 17% corporate, 20% top personal, 0% capital gains.
• Hong Kong — territorial; 16.5% corporate, 16% top personal, no capital gains tax.

Both pair a territorial base with low headline rates and no capital gains tax, which is why each attracts regional headquarters, fund managers and globally mobile professionals.

How it contrasts with worldwide systems

Worldwide systems tax residents on global income regardless of source:

• United States — worldwide; 21% corporate, 37% top personal.
• United Kingdom — worldwide; 25% corporate, 45% top personal.

Under worldwide taxation, foreign income is brought into charge (with credits or treaty relief to offset double tax). Under a territorial system, that same foreign income is typically untaxed locally.

The “source” question

The practical complexity is defining where income arises. Territorial regimes hinge on detailed source rules — where a contract is performed, where management sits, where a sale concludes. Two taxpayers with similar facts can land on opposite sides of the line, so structuring and documentation matter. Territorial taxation is a powerful advantage for cross-border earners, but only when the source position is robust.

Data basis: Government tax authority data via taxesmap.app, as of 2026