There are three ways a country can define its tax borders: citizen-based, residence-based and territorial. A citizen-based tax system taxes all income earned by the citizen, regardless of where that citizen lives or where the income is earned. The residence-based model taxes worldwide income of those individuals who are resident in the country. The territorial system taxes only the income earned within the country. The United States uses both the citizen-based tax system and the residence-based tax system. U.S. citizens and U.S. income tax residents are subject to U.S. taxation on their worldwide income (net of deductions) as well as reporting requirements on certain foreign financial assets.