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The Canada Revenue Agency (CRA) audits large corporate taxpayers on a regular basis. To improve efficiencies and cash recoveries, CRA is moving to a risk-based assessment approach to auditing such taxpayers. Over the next five years, corporate taxpayers will be assessed as low, medium and high risk, based on a series of factors. The frequency and intensity of the audit processes will vary directly with the risk ascribed to the particular taxpayer. Consequently, large corporations which now face consistent audit scrutiny on domestic and cross-border tax issues may find that CRA audit work abates or becomes more focused on specific areas in which significant tax liabilities may arise. Two areas of continuing review involve transfer pricing and aggressive tax planning. CRA regards the latter term as one referring to arrangements which comply with the letter but not the spirit of the statutory provisions that give rise to tax benefits.

Under Brazil's federal constitution of 1988, the states of the federation and the federal district are entitled to establish tax on the "circulation of merchandise, on interstate and inter-municipal transportation services, and on communication services". The states' powers over this value-added tax, or Imposto sobre Operações relativas à Circulação de Mercadorias e Prestação de Serviços de Transporte Interestadual e Intermunicipal e de Comunicação (ICMS), are not unlimited, however. One limitation is found in article 155 §2 (XII) (g), which provides that a specific type of federal legislation known as a complementary law is required to grant ICMS exemptions and other benefits.

Julie Zhang JSM Beijing Representative Office

Miguel Lorán Freshfields Bruckhaus Deringer

Datuk D P Naban

Laurent Borey Mayer Brown

Dieter Birk P+P Pöllath + Partners

Tax Controversy Leaders is a guide to the leading tax dispute resolution lawyers and advisers in the world. In addition to highlighting tax professionals, the guide also includes litigators and barristers who may not practise tax on a day to day basis.

Axel Haelterman Freshfields Bruckhaus Deringer

South Korea has announced that it will impose a withholding tax on interest received by overseas investors in foreign currency bonds.