Constitutional Restraints on Corporate Tax Integration

76 Pages Posted: 5 Mar 2008 Last revised: 20 Oct 2015

See all articles by Walter Hellerstein

Walter Hellerstein

University of Georgia School of Law

Georg Kofler

Johannes Kepler University; NYU School of Law

Ruth Mason

University of Virginia School of Law


Double taxation of corporate profits distorts the choice of business form, the debt and equity capitalization of companies, and the character and timing of profits distributions. To avoid these distortions, countries adopt so-called integrated corporate tax regimes. But countries almost always limit such regimes to domestic dividend--those paid by a corporation taxable in the country to a shareholder also taxable in the country. In contrast, countries generally deny double tax relief to cross-border dividends. Failure to extend relief to cross-border dividends distorts locational investment decisions. Although restricting double tax relief to domestic dividends does not violate international tax nondiscrimination rules, more stringent nondiscrimination rules govern member states of the European Union and U.S. states. Member states of those common markets may not constitutionally prefer domestic commerce over cross-border commerce. This constitutional nondiscrimination obligation limits the ability of EU and US states to confine double corporate tax relief to domestic dividends. This symposium paper establishes the basic framework for taxation of cross-border dividends, closely analyzes and compares constitutional challenges to states' failure to extend double tax relief to cross-border dividends in Europe and the United States, and identifies the principal policy considerations emerging from the nascent cross-border dividend jurisprudence in the European Court of Justice.

Keywords: Corporate tax integration, United States, European Union, cross-border dividends, DRD, imputation, capital export neutrality, locational neutralituy, double tax, double corporate tax

Suggested Citation

Hellerstein, Walter and Kofler, Georg and Mason, Ruth, Constitutional Restraints on Corporate Tax Integration. Tax Law Review, Forthcoming. Available at SSRN:

Walter Hellerstein

University of Georgia School of Law ( email )

209 Hirsch Hall
Athens, GA 30602
(706) 542-5175 (Phone)
(706) 542-5556 (Fax)

Georg Kofler

Johannes Kepler University ( email )


NYU School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Ruth Mason (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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