Is it better to return null or empty collection?

Empty collection. Always.

This sucks:

if(myInstance.CollectionProperty != null)
{
  foreach(var item in myInstance.CollectionProperty)
    /* arrgh */
}

It is considered a best practice to NEVER return null when returning a collection or enumerable. ALWAYS return an empty enumerable/collection. It prevents the aforementioned nonsense, and prevents your car getting egged by co-workers and users of your classes.

When talking about properties, always set your property once and forget it

public List<Foo> Foos {public get; private set;}

public Bar() { Foos = new List<Foo>(); }

In .NET 4.6.1, you can condense this quite a lot:

public List<Foo> Foos { get; } = new List<Foo>();

When talking about methods that return enumerables, you can easily return an empty enumerable instead of null...

public IEnumerable<Foo> GetMyFoos()
{
  return InnerGetFoos() ?? Enumerable.Empty<Foo>();
}

Using Enumerable.Empty<T>() can be seen as more efficient than returning, for example, a new empty collection or array.

From the Framework Design Guidelines 2nd Edition (pg. 256):

DO NOT return null values from collection properties or from methods returning collections. Return an empty collection or an empty array instead.

Here's another interesting article on the benefits of not returning nulls (I was trying to find something on Brad Abram's blog, and he linked to the article).

Edit- as Eric Lippert has now commented to the original question, I'd also like to link to his excellent article.

Depends on your contract and your concrete case. Generally it's best to return empty collections, but sometimes (rarely):

• null might mean something more specific;
• your API (contract) might force you to return null.

Some concrete examples:

• an UI component (from a library out of your control), might be rendering an empty table if an empty collection is passed, or no table at all, if null is passed.
• in a Object-to-XML (JSON/whatever), where null would mean the element is missing, while an empty collection would render a redundant (and possibly incorrect) <collection />
• you are using or implementing an API which explicitly states that null should be returned/passed