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What does it mean to be a US person?

US persons are subject to tax in the US on their worldwide income, even if they do not live in the US or have any income from a source within the US. This is often referred to as citizen based taxation (CBT). Only the US and Eritrea, which imposes an annual tax on its citizens who live outside the country, use a CBT system. The rest of the world taxes based on physical residence. This is generally called ‘territorial or residence based taxation’. Under this system, individuals are only subject to tax in the country in which they physically reside or if they earn income from sources within that country.

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