Extraterritoriality of taxation

As a rule, the power to tax is limited to the State's territory because, as an inherent power of sovereignty, it follows the rule that sovereignty extends not beyond the sovereign's territorial limits.

The national territory comprises the Philippine archipelago, with all the islands and waters embraced therein, and all other territories over which the Philippines has sovereignty or jurisdiction, consisting of its terrestrial, fluvial and aerial domains, including its territorial sea, the seabed, the subsoil, the insular shelves, and other submarine areas. The waters around, between, and connecting the islands of the archipelago, regardless of their breadth and dimensions, form part of the internal waters of the Philippines. (Article I)

However, there are exceptions. For example, under Philippine income tax law, resident citizens are taxed on their income from outside the Philippines. This does not mean that the government of the country where the income was derived is obliged to collect the tax in behalf of the Philippine government. The obligation is imposed on the citizen to pay the tax.

Tax treaties and international comity are other exceptions.

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