This article considers the debate on source versus residence taxation from an EU perspective. The article first examines the traditional principle as stated by the European Court of Justice (ECJ), namely, that although direct taxation falls within the competence of the Member States, they may violate Community law by taxing residents and non-residents differently. The article then discusses new aspects of the ECJ's case law, including the De Groot and Gerritse cases, and territoriality and the common (single) market in Europe. The article concludes with a possible solution.