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Taxand's Take - Your regular update on the latest issues affecting multinationals

29 May 2010

Welcome to the latest edition of Taxand's Take - your regular update on the topical tax issues affecting multinationals. Accessible online this newsletter is sent to you every two months. And Taxand's Take will give you just that - informed opinion on the latest tax changes and how they affect you.

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FEATURE: Indian AAR Grants Treaty Relief to Mauritius Taxpayer on Capital Gains Bringing Cheer to Investors

Mukesh Butani
Taxand India
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Gary Gowrea
Taxand Mauritius
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In a recent ruling by the Authority for Advance Ruling ("AAR") in India, capital gains exemption was allowed to a Mauritius taxpayer (E Trade Mauritius Ltd) under the India-Mauritius tax treaty (the treaty). The AAR ruled that the capital gain arising on transfer of shares in an Indian company held by a Mauritian resident investor was subject to tax only in Mauritius, as per Article 13 of the treaty. Taxand India and Taxand Mauritius assess the ruling and the benefits (and relief) it brings to investors.

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EUROPE - European Commission Attacks German Anti-Abuse Provision on Withholding Tax Relief

Over the past few years German tax law has increasingly been influenced not only by German legislative and judicative forces / authorities but also by European institutions, such as the European Court of Justice and the European Commission. With its recent request of 18 March 2010 the European Commission moved forward with the second step of the formal infringement procedures against Germany concerning the anti-abuse provisions on withholding tax relief affecting EU holding companies specifically. Taxand Germany reviews these provisions and garners reaction on the impact from Taxanders across Europe.

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US - Private Equity or Disguised PFIC?

Private equity funds frequently invest in a host of investments, including portfolio companies organised outside the United States. Among the many challenges faced by funds investing overseas, the US passive foreign investment company (PFIC) rules under Internal Revenue Code Sections 1291-1297 can have a significant impact on your investment returns. The punitive consequences of triggering the PFIC rules can be costly. Taxand US examines the requirements, exceptions and warning signs associated with investing in a PFIC.

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UK - Employment Tax Compliance - Complex, Costly and Challenging

As summer rolls around the corner, hay fever sufferers are feeling the irritating effects of the increasing pollen count just as tax directors are experiencing the galling impact of rising income tax and social security charges, the irksome increase in payroll compliance requirements and the annoying growth of employment tax costs within their budgets. Whilst it is not possible to cure this affliction there are prophylactic steps which can be taken to lessen the pain. Taxand UK discusses why now more than ever tax directors need to take the lead in order to face the increasingly complex, costly and challenging employment tax compliance environment.

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POLAND / SWITZERLAND - Poland - Switzerland DTT Protocol Captures Interest from Tax Authorities and Investors

Recently Polish tax authorities have made public the protocol from negotiations with Swiss tax authorities (Protocol) regarding changes in the double tax treaty (the Treaty) signed between both countries. The Protocol signed on 20 April 2010 formally marks the end of negotiations between the parties. Whilst nothing is certain until ratification in both countries, it is highly unlikely that any further major changes will be introduced. Taxand Poland and Taxand Switzerland investigate the impact of the Protocol for multinational businesses and consider the points of interest for both tax authorities and investors.

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CHINA - China Announces a Unified Measure Regarding Foreign Company's Representative Office's Taxation

 

Considering the comparatively simple and convenient setting up process and relatively low operating costs, registering a Representative Office (RO) is generally the initial step for foreign companies wishing to invest in and experience the local market. On 20 February 2010, the State Administration of Taxation (SAT) issued a circular entitled Tentative Measures for the Administration Offices of Foreign Enterprises, to regulate and unify previous rules covering taxation matters of ROs established in the PRC. Circular 18 takes retroactive effect from 1 January 2010. Taxand China examines the impact on non-resident entities and actions that can be taken immediately by non-residents.

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The information contained in this document is intended only to be a guide. It must not be relied on in, or applied to, specific situations without previously seeking proper professional advice. Even though all reasonable care has been taken in its preparation, Taxand and all the members of this network do not accept any liability for any errors that it may contain or lack of update before going to press, whether caused by negligence or otherwise, or for any losses, however caused, or sustained by any person. Descriptions of, or references or access to, other publications within this publication do not imply endorsement of them. As provided in the US Treasury Department Circular 230, this tax newsletter is not intended, or written by any Taxand member firm, to be used, and cannot be used, by a client or any other person or entity for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Taxand member firms have produced this tax newsletter in connection with the marketing of our tax services relating to matters discussed therein. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. Taxand is a global network of tax advisory member firms. Each member firm is a separate and independent legal entity responsible for delivering client services.

(C) Taxand Economic Interest Grouping 2010

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