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The IRS is unhappy with multinationals exploiting cross-border differences in treatment of debt and equity for tax gains and is throwing more resources into preventing it. But Hewlett Packard, Scottish Power and PepsiCo were all challenged in the US Tax Court over debt-equity issues last year and two of them emerged victorious. Joe Dalton explains why such structures are still a valid and beneficial option for taxpayers and how to prepare your case if the IRS comes calling.

VDB Loi has hired Graham Garven to lead its tax team in Jakarta. He joins from KPMG where he was a partner and head of the firm's transfer pricing practice.

Jeff Malo Jeff Malo and Ron Hodgeman have been made partners at WTP Advisors in White Plains, New York. Malo leads WTP's US R&D tax credit services and co-leads the interest and penalty team.

"We all want to change the world", John Lennon once sang.

Dajana Topic Free trade zones are part of the customs territory of Bosnia and Herzegovina (BiH) managed by the founder of the free zone. The users of free zones do not pay taxes and contributions, with the exception of those related to salaries and wages. Investors are free to invest capital in the free zone, transfer their profit and re-transfer capital with no charge.

Michalis Zambartas In view of the imminent memorandum of understanding between the Republic of Cyprus and Troika (International Monetary Fund, Eurogroup and European Central Bank) for financial support, the Cyprus Parliament has been particularly active in the last weeks of 2012 to vote new laws essentially aiming to meet pre-agreed targets with the Troika. There are number of new laws which affect both local and international investors and businesses.

Renaud Jouffroy

Petter Grüner In a Norwegian Supreme Court case (HR-2012-01759-A) Statoil Holding AS vs. the Norwegian State, the court concluded that a loss on realisation of a stake in the German limited partnership Norsk Hydro Deutschland GmbH & Co KG was non- deductible for the (Norwegian) limited partner. The reason was that (i) the KG was not transparent and (ii) that the KG was "equal to" a Norwegian corporation as defined in the Norwegian Companies Act. According to the Norwegian Tax Act section 2-38, a gain realised on shares in non-Norwegian corporations which are "equal to" a Norwegian company is exempt from taxation for a Norwegian corporate shareholder if certain requirements are met and a corresponding loss is not deductible.

Tiago Cassiano Neves

Gordana Vucenovic On December 15 2012, the Serbian Parliament officially adopted the amendments to the Corporate Income Tax Law as a part of the fiscal consolidation measures which aim to decrease the budget deficit of Serbia. Believing that the new changes might significantly influence the current business principles in Serbia, we outlined the most important changes below: The corporate income tax (CIT) rate is increased from 10% to 15%. The deadline for submission of annual tax returns is extended to 180 days, as of the end of the tax year. If the legal entity has suffered statutory changes, bankruptcy and liquidation, that deadline is 30 days from the deadline for submission of the financial statements. For the first time the category of tax haven jurisdictions is introduced, and the list of the jurisdictions considered tax heavens will be issued by the Ministry of Finance. The withholding tax on services is introduced, and the legal entities in Serbia will be obliged to withhold the general rate of 20% for services provided to the non-residents except when the recipient of income is the resident of a tax haven, where the withholding tax will be 25%. The threshold for deductibility of marketing expenses is increased from 5% to 10% of the total revenue. To qualify for large tax credits minimum investments in fixed assets is increased from RSD800 million ($9.4 million) to RSD1 billion provided that minimum of 200 new (instead of the previous 100) persons are employed for an indefinite period on full time base. The shareholding participation in non-resident subsidiary, for qualifying the legal entity to apply for tax credit, is decreased from 25% to 10%. To be considered as related party the percentage of participation in capital or voting rights is decreased from 50% to 25%. The projection of the Ministry of Finance of Serbia is that the amendments of the VAT Law, followed by other measures relating to the rebalancing of the budget would decrease the budget deficit from 7.1% to 6.7% in the year end 2012, and by the end of 2013, the budget defecit is expected to be decreased to 4%.