What are the primary types of international tax structures?

International tax structures are the legal structures that determine how and when taxes are levied on income earned from foreign sources. In Maryland, the primary types of international tax structures are territorial taxation, residence-based taxation, and source-based taxation. Territorial taxation is the practice of levying taxes according to the location of where the income was earned. This means income from foreign sources is subject to taxation only in that country. For example, if a company headquartered in Maryland earns income in Canada, it would pay taxes on that income to the Canadian government. Residence-based taxation is the practice of levying taxes based on an individual’s residency or citizenship status. Taxpayers who are residents or citizens of Maryland are taxed on all of their income, regardless of where it was earned. This means a Maryland resident who earns income from a foreign source must report it on their U.S. taxes and pay applicable taxes to the U.S. government. Finally, source-based taxation is the practice of taxing income based on the source from which it is generated. This is most commonly used for non-residents who earn income in Maryland but do not have citizenship in this state. Non-residents may only be subject to taxation on income that is generated from activities that occurred in Maryland. In short, international tax structures are the framework by which governments levy taxes on income earned from foreign sources. In Maryland, the primary types of international tax structures are territorial taxation, residence-based taxation, and source-based taxation.

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What are the primary types of international tax structures?

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