Worldwide Tax System is a tax system that taxes residents on their global income, with foreign tax credits used to relieve double taxation.
A worldwide tax system taxes resident companies and individuals on income earned anywhere in the world. To prevent the same income being taxed twice, the home country grants a foreign tax credit (FTC) for taxes paid abroad, capped at the domestic tax that would have been due on that income. Historic examples include the United States (pre-2017), India, Mexico, Chile, and several African countries.
Residents must report worldwide income on their domestic tax return, convert it to local currency, claim FTCs subject to baskets and per-country limits, and add back any income deferred in low-tax subsidiaries through CFC rules. The compliance burden is heavier than in territorial regimes, particularly for groups with operations in many jurisdictions.
Most countries today operate hybrid regimes: nominally worldwide, but with participation exemptions for foreign dividends, branch exemptions, and Pillar Two top-up tax replacing some of the role of CFC rules. The pure worldwide system is rare in modern practice.
India is the most prominent large economy still operating predominantly on a worldwide basis, with extensive use of FTCs and the Foreign Source Income (FSI) framework.
You will encounter worldwide tax mechanics when a parent company is resident in a worldwide regime (India, Mexico, Chile), when computing foreign tax credits on foreign-source dividends, royalties, or interest, and when modelling repatriation paths from operating subsidiaries to the parent.
See what a company actually costs in year one, and how the jurisdictions compare on tax, capital and timeline.
