Two countries with the same headline tax rate can produce wildly different bills for an expat, because the bigger lever is the basis of taxation — what income the country reaches in the first place. There are three models.
The three models at a glance
| Model | What is taxed | Foreign pension? | Examples |
|---|---|---|---|
| Worldwide | All income, wherever it arises | Yes (with treaty relief) | Germany, France, Spain, US, Canada, Australia |
| Territorial | Only locally-sourced income | No, generally | Panama, Costa Rica, Georgia, Malaysia, Singapore, Hong Kong |
| Remittance | Local income + foreign income you bring in | Only if remitted | Malta, Ireland (non-doms), UK (4-year FIG) |
Headline rules for 2026, from PwC Worldwide Tax Summaries. General information, not tax advice.
Worldwide taxation
This is the default in most developed economies. Once you are tax resident, the country taxes your salary, foreign pension, foreign dividends and offshore gains — wherever they arise. See the full list of worldwide-tax countries. The relief valve is the double-tax treaty: you generally get a credit for foreign tax already paid, or the foreign income is exempt but counted to set your rate (“exemption with progression”). Worldwide taxation only really hurts when foreign income was taxed lightly or not at all at source — then your new home taxes the gap.
Territorial taxation
A territorial country draws a line at its border: only income with a local source is taxed. A retiree in Panama or Costa Rica living on a US or UK pension typically pays nothing locally on that pension, because it is foreign-source. Georgia, Malaysia, Singapore and Hong Kong work similarly for individuals. The subtlety is source: if you perform work while physically in the country, that income can be local-source even if the client and bank account are abroad.
The remittance basis
A middle path: foreign income is taxed only when remitted (brought into the country). Malta applies this to non-domiciled residents; Ireland keeps a non-dom remittance basis; the UK’s new 4-year FIG regime is a time-limited version that exempts foreign income and gains entirely for qualifying new arrivals. Timing and segregating “clean” capital become the planning game.
Why this matters more than the rate
Compare a retiree with a EUR 50,000 foreign pension:
- In Panama (territorial): the pension is foreign-source, so the local tax is roughly zero.
- In Germany (worldwide, top rate 45%): the pension is fully in scope and taxed at progressive rates, with treaty relief depending on the pension type.
Same person, same money — a vast difference, driven by the basis, not the rate. Before you fixate on a headline percentage, find out whether your foreign income is even in scope. Use the country profiles and the day counter to map your situation, then confirm with a professional.