CJEU Case Law in Direct Taxation: Territoriality and Fundamental Freedoms

S. 1964. Conclusion

4.1. The Different Facets of Territoriality

Chapter 2 illustrated that territoriality carries different meanings depending on the underlying context with a common element being the idea of a nexus to a territory. First and foremost, this coexistence of different facets of territoriality was demonstrated by reference to territoriality in general international law and territoriality in tax law. In the context of general international law, territoriality is a principle governing the exercise of state jurisdiction and expresses that state actions are only effective if they are connected to the territory of a state. The contours of the limiting effect of the principle of territoriality are rather vague. Pursuant to the landmark decision “Lotus”, only jurisdiction to enforce is limited by the principle of territoriality while states enjoy wide discretion regarding their jurisdiction to prescribe. Different from that, the prevailing opinion in literature also considers prescriptive jurisdiction to be limited by the principle of territoriality and requires a genuine link to the state’s territory thereby referring to the decision in Nottebohm. Territoriality also has a long trad...