CJEU Case Law in Direct Taxation: Territoriality and Fundamental Freedoms

S. 422. The Principle of Territoriality

2.1. The Principle of Territoriality in General International Law

2.1.1. Territoriality and Nationality

Though sovereign a state and its jurisdiction are subject to international law. Regarding sovereignty and jurisdiction, both terms carry different meanings. In its most common usage, sovereignty denotes the collection of rights of a state in its capacity as the entity allowed to exercise control over its territory and to represent its territory and its people on an international plane. Sovereignty thereby indicates supreme authority and independence from any other authority.

Sovereignty must not be confused with jurisdiction which is an aspect of a state’s sovereignty. Jurisdiction denotes a state’s power to exercise, i.e. its judicial, legislative, and executive competence. International law provides various principles regulating how jurisdiction may be exercised. The two most important ones in the field of tax law are the principle of territoriality and the principle of nationality. Historically, the principle of nationality predated the principle of territoriality as a jurisdictional basis. In early stages of human development, community was buil...