#!/usr/bin/perl

use XML::Parser;
use utf8;           ###added
$xml = "<word>Müller</word>";

$ch = sub {
my ($p, $w) = @_;
    binmode STDOUT, ":encoding(UTF-8)"; ###added
    print "#$w#\n";
};

# the next commented 2 lines mean the same
# and translate the output to iso-8859-1
# $p = XML::Parser->new();
$p = XML::Parser->new(ProtocolEncoding => 'UTF-8');

# this line do the right job, but why??
#$p = XML::Parser->new(ProtocolEncoding => 'ISO-8859-1');

$p->setHandlers('Char' => $ch);
$p->parse($xml);