Can a citizen of one country be charged income-tax by another country even if he/she has never resided in that other country based on income sourced through customers of that country?
Generally speaking - it least from the US point of view - the answer is absolutely yes.
A foreign investor in US real estate is subject to US Federal (and possibly state and local) income tax on capital gains from the sale of the property and on any rental income received with respect to it.
A foreign investor receiving dividends from a US corporation is subject to income tax on the dividends.
The above applies even if the foreigner never set foot in the US.
On the other hand:
A foreign investor receiving interest income from a US debtor is (generally) not subject to US income tax on.
A foreign service provider who provides services to a US customer is not generally to subject to US income tax if the services were performed entirely outside the US.
Finally, if there is a tax treaty between the US and the other country, these results may be modified by the treaty.
Generally speaking yes. Actual physical residence is not the only test countries use to determine tax residence. Contrary to what many people seem to believe, there is no overarching internationally agreed principle that tax residence only exists if you spend X days in a country or anything like that (in fact, the tax year is not the same in all countries in the world).
Just as an example, here is a short summary of the rules in France:
Unless international tax treaties state otherwise, you are considered to be a resident of France for tax purposes if you fulfil at least one of the following criteria :
You have a professional activity in France, as an employee or otherwise, unless this activity is secondary.
The centre of your economic interests is in France. In other words, France is the location of your main investments, your place of business, the location of your professional activities, or the source of the majority of your income.
If your "tax domicile" is in France, you are liable for French taxes on all of your income, including compensation for activity carried out abroad. You must file an income tax return with the tax office with jurisdiction over your tax domicile.
As another example of taxation without physical residence, US law is notorious for covering US citizens' income no matter where they live in the world (but that's a slightly different scenario and not based on drawing any sort of income from the US). In both cases, the country in question would deem you a tax resident and tax the entirety of your worldwide income (possibly subject to some exemptions like the foreign tax credit).
If you do not reach the threshold for tax residence (e.g. the income you get from these customers is a small part of your overall income), another set of rules would apply but you might still be liable for various taxes (in European countries that would typically include VAT, payroll or corporate taxes, but not necessarily personal income taxes).
Yes, there are situations where that happens. It's actually not uncommon.
- Sales tax/VAT is typically due in the country of sale
Income from such sales may be taxable in the country of sale as well. See nonresident taxpayer or person with limited tax liability.
This may be changed (everyone declaring their income in their home country) by tax treaties.
E.g. if Software developer S somewhere outside Germany sells licenses in Germany to some customer C there, the profits from these sales are taxable in Germany and moreover, C has to send an appropriate fraction of the sales price to the German tax office. If S's country of residence has a tax treaty with Germany, S (or sometimes also C) can either file an exemption beforehand, or claim back taxes that C withheld on behalf of S.