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Khoonming Ho

van der Made The Italian EU Presidency's Code of Conduct Group (Business Taxation) six-monthly progress report to the ECOFIN Council was finalised on December 11 2014. On patent boxes, following all discussions in the OECD Forum on Harmful Tax Practices (FHTP) around BEPS Action 5, a compromise regarding the modified nexus approach and how to assess whether there is substantial activity in an IP regime, was endorsed by the Code Group on November 20 2014. The Code Group agreed that all the EU patent box regimes that had been subject to examination by the Group are not compatible with the modified nexus approach as adapted by the compromise. As a consequence, these EU patent boxes should therefore be changed in line with the compromise. As part of the agreement, countries with existing IP regimes must agree to close these to new entrants by June 30 2016 and will abolish them by June 30 2021, after which all countries will be required to operate only nexus-compliant regimes. New entrants can therefore still enter the existing patent boxes until June 2016 and benefit from the five year grandfathering. The Code Group agreed that the legislative process necessary to give effect to that change and the related monitoring by the Code Group should commence in 2015. The Netherlands has made a reservation regarding the scope of IP assets qualifying for tax benefits under an IP regime in respect of the compromise regarding the modified nexus approach.

David Cuellar

Peter Dachs The concept of base erosion and profit shifting (BEPS) has been much discussed at various international fora. From a South African perspective, the Davis Tax Committee has been set up, inter alia, to address the issue of BEPS in a South African context.

Donald Vella

Joseph Hong Recently, the number of free trade agreement-related disputes has increased in Korea, and many cases involve country-of-origin verification by the customs authority of the exporting country under what is called an 'indirect verification regime'. In this regime, the customs authority of the exporting country conducts origin verification at the request of the customs authority of the importing country, and the FTAs adopting this regime usually require that the reply from the exporting country must be provided within a certain period and the reply must contain detailed information related to origin determination unless there are exceptional circumstances. However, the term 'exceptional circumstances' has been very narrowly interpreted by Korean courts and, as a result, importers are being punished for the failure by the customs authority of the exporting country to comply with the requirements under the FTAs. In 2014 Guhap 51777 (November 25 2014), the Seoul Administrative Court held that the unavailability of relevant documents due to a short document retention period under the law of the exporting country is not one of the exceptional circumstances which justifies non-compliance with the requirements under the relevant FTA. In this case, the importer at issue (Company N) is a Korean subsidiary of a Swiss-based multinational pharmaceutical company. In 2007 and 2008, Company N imported pharmaceutical products from a Swiss company. Preferential duty rates under the Korea-EU Free Trade Agreement (EU FTA) were applied based on the certificate of origin issued by the exporter.

Gerry Thornton

Pawel Mazurkiewicz With effect from January 1 2015, the Polish corporate income tax law has been amended substantially. These amendments were mainly aimed at governing three issues: Elimination of certain opportunities for aggressive tax planning (in particular, structures allowing for the tax free exchange of assets); Introduction of the new system of thin capitalisation restrictions; and Introduction of a regime for the taxation of controlled foreign corporations (CFCs). From the foreign investors' standpoint, the new thin capitalisation regime is certainly the most important item. Until the end of 2014, Polish thin capitalisation restrictions were, in practical terms, irrelevant (the permissible limit of debt-to-equity was 3:1, and even more importantly, in principle only loans provided by direct shareholders were qualified as falling within the scope of thin capitalisation). Therefore, almost all interest paid in respect to loans provided by related parties were fully tax deductible. New shape of this legislation introduces the following features of thin capitalisation:

Tax Relief has written enough articles in his time about government ministers adding to the pages of national tax legislation. He never hears about cuts to the size of a tax code or reducing the number of tasks required to comply with it. The stories have always been about more pages and more procedures. But what's this? A tax minister who has made life easier for taxpayers? No, it can't be true. But it is.

Type of deal Value Acquirer Target Adviser to acquirer (tax) Adviser to target (tax) Merger $17 billion Pfizer Hospira Ropes & Gray; Clifford Chance Skadden Arps Slate Meagher & Flom Definitive combination agreement $16 billion Rock-Tenn Company MeadWestvaco Blackstone Advisory Partners; Cravath, Swaine & Moore Wachtell, Lipton, Rosen & Katz: Jodi Schwartz, Joshua Holmes, Michael Sabbah; BofA Merill Lynch; Goldman Sachs Merger-of-equals $11 billion PartnerRe AXIS Capital Holdings Davis Polk; Credit Suisse (financial) represented by Skadden Arps Slate Meagher & Flom Simpson Thacher & Bartlett; Conyers Dill & Pearman; Goldman Sachs Acquisition $10.5 billion Frontier Communications Corporation Verizon Communications (wireline operations in California, Florida and Texas) Skadden Arps Slate Meagher & Flom: Steven Matays; Greenhill & Co advised Frontier’s board of directors