A tax system that taxes only income generated within the country's borders, leaving foreign-source income untaxed. Operated by most Caribbean CBI states.
Territorial taxation is the system under which a country taxes only income with a domestic source — income generated, earned, or accruing within its borders — and exempts foreign-source income earned by its residents. This contrasts with the worldwide taxation regime operated by most major OECD economies.
All five operating Caribbean CBI states (Antigua, Dominica, Grenada, St Kitts, St Lucia) operate territorial regimes. A CBI passport holder who does not live or earn in the issuing country generally has no income tax liability there.
Other notable territorial jurisdictions include Hong Kong, Singapore, Panama, Costa Rica, and Malaysia. Singapore and Hong Kong apply additional sourcing rules that can pull some foreign income into the tax net.