The Function of Corporate Tax-Residence in Territorial Systems

28 Pages Posted: 16 Jul 2014 Last revised: 17 Jul 2020

See all articles by Omri Y. Marian

Omri Y. Marian

University of California, Irvine School of Law

Date Written: September 27, 2014

Abstract

This Essay explains the functional importance of corporate tax-residence determination
in territorial systems. I differentiate between “positive” and “negative” functionalities of corporate tax-residence in territorial systems. Under a positive approach, corporate tax-residence positively points to the source of income earned by the corporation. Thus, corporate taxes serve as a proxy to source taxation. While the positive function had historical merit, it is currently obsolete. Under a negative approach, corporate tax-residence is only relevant to the extent it prevents income from being sourced to a jurisdiction in which income could not have possibly been generated. As such, residence determination serves as an instrument to prevent income shifting and base erosion. I suggest that this is the correct role of residence determination in the current environment.

Keywords: International Tax Reform; Territorial Taxation; Worldwide Taxation; Corporate Tax; Tax History; Comparative Taxation; Corporate Tax-Residence

JEL Classification: E62, H23, H25, H29, K34

Suggested Citation

Marian, Omri Y., The Function of Corporate Tax-Residence in Territorial Systems (September 27, 2014). 18 Chapman Law Review 157 (2014), Available at SSRN: https://ssrn.com/abstract=2466082

Omri Y. Marian (Contact Author)

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States

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