World income principle

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The world income principle states that in a state (eg. As a result of their residence ) taxable on their worldwide income tax are, regardless of where the income has been made.

Germany is one of the countries that tax according to the world income principle. The world income principle applies in Germany only to unlimited taxpayers (so-called tax residents ) in accordance with Section 1, Paragraph 1 of the Income Tax Act (EStG).

To avoid double taxation for taxpayers who have earned taxable income in more than one country, most countries have concluded double taxation treaties . These agreements regulate which state has the right to tax in each individual case. Taxes paid in another country can, under certain conditions, be offset against the tax liability in Germany.

The world income principle is often confused with the non-resident tax liability of all citizens, which applies , for example, in the USA .