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Arne Schnitger

Littlewoods, the retailer, has been successful in a case concerning VAT compound interest worth £1.2 billion ($2 billion).

Antonis Michaelides The Law Regulating Companies Providing Administrative Services and Related Matters, Law 196(I)/2012 (the Fiduciaries Law) was enacted in December 2012 establishing a licensing and supervisory body for corporate and fiduciary services providers as per Directive 2005/ 60/EC of the EU. Pursuant to Cyprus's commitment to transparency and enhanced regulations, on September 9 2013 Law 109(I)/2013 amended the Fiduciaries Law in respect to the disclosure of information on Cypriot international trusts.

Bob van der Made On April 14 2014, the Council's High Level Working Party (HLWP) meeting discussed a Greek Council Presidency proposal for a split approach to the revision of the parent-subsidiary directive (2011/96/EU), which was proposed by the European Commission at the end of 2013. Under the proposed split, the PPLs/hybrid loans part of the proposed revised parent-subsidiary directive (PSD) would still be adopted in Council under the six-monthly rotating Greek EU Presidency, that is before June 30 2014. The relevant new Article 4(1)(a) of the PSD provides that where a parent company, by virtue of its association with its subsidiary, receives distributed profits, the member state of the parent company shall refrain from taxing such profits to the extent that such profits are not deductible by the subsidiary of the parent company. The PPLs/hybrids proposal follows the political guidance agreed in 2009 within the EU's Code of Conduct Group on business taxation and allows this political guidance to be implemented in domestic tax law. The agreed deadline for transposing changes to the PSD into the domestic legislation of all 28 member states is most probably December 31 2015.

Donka Pechilkova The Bulgarian National Revenue Agency published an official opinion regarding the VAT Act, and more specifically related to the part concerning the reinvoicing of expenses, when they are not part of explicit obligations, related to major transactions between two VAT registered companies. This action is a step towards unifying the local Bulgarian legislation with the standards applicable in the EU. Reinvoicing done by one company (receiver of the service) to another legal entity (the real beneficiary of that service) is a sensitive topic in Bulgaria. The reason for the sensitivity is the grounds of the service-receiving company to reinvoice to another company. A very common situation in the existing business practice is one company to reinvoice services like electricity, water supply, and mobile telephones to another VAT registered company. Tax officers are recently refusing to recognise the accrued VAT from such transactions for the real beneficiary of the service, treating the company as an end consumer, with the argument being the function and the character of VAT as an indirect, multi-phase tax. This results in the economic burden being undertaken by the end users. Additionally, the tax officers treat the receiving company to not be the real provider of the service. As these standpoints contradict with the operating EU rules, according to the official new opinion of the Bulgarian tax authorities, published February 2014, such transactions that assure the operating economic activity of the real beneficiary of the reinvoiced service are fully acceptable. They even go further based on a decision of the European Court of Justice (ECJ) by case C-25/03, according to which in such cases the reinvoicing is not only possible, but is recommendable. It must be noted that reinvoicing could be applicable only if the participants in the transaction do not alter the tax base, tax event, or place of delivery. In that sense, the VAT accrued to a foreign EU entity will not be recognised by the Bulgarian National Revenue Agency as the place of delivery would have been altered. Fully in accordance with the decisions of the ECJ there is one more specific item, concerning zero VAT rates of deliveries to entities that possess documentation allowing them enjoying such preferential rates – these prefix rates are applicable only for these companies and cannot be reinvoiced to other companies with such prefix rate.

Ayesha Lau

In the second part of her analysis of Caterpillar’s tax affairs following the company’s appearance before the Senate Subcommittee on Investigations, Mirna Screpante, tax researcher, looks at the division between the location of activities and the location of taxable profits and proposes a method for determining economic substance.

The Dave Camp-led House Ways & Means Committee this week approved the permanent extension of six extender tax provisions, including the research and experimentation credit, the controlled foreign corporation (CFC) look-through provision, and subpart F active financing.

This will be my final issue as editor of International Tax Review. I will soon be going on to edit a new global current affairs magazine called The World Weekly. If I thought international tax law was a complicated subject when I first started writing about it four years ago, how much more complicated the murky world of geopolitics. But what a fascinating four years it's been reporting on tax. I certainly can't imagine a more interesting time.

Donald Johnston, secretary general of the OECD between 1996 and 2006, has joined the International Tax and Investment Centre's board of directors as an honorary co-chairman. He will advise ITIC on key fiscal reform programmes and ITIC's work in the BRIIC (Brazil, Russia, India, Indonesia and China) and other emerging economies.