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Edward Tanenbaum Tola Ozim Ronald Dabrowski, the deputy associate chief counsel (international technical) at the Internal Revenue Service (IRS), has provided taxpayers with the welcome news that a substantial business activity safe harbour, which had been removed from recent anti-inversion regulations, would likely be revived in final regulations still to come. Section 7874 generally applies to prevent entity inversions or expatriations by taxing inversion gain or, in some cases, by treating the foreign acquiring corporation as a domestic entity. A transaction comes within these rules where 1) a US corporation or partnership transfers substantially all of its property to, or becomes a subsidiary of, a foreign corporation; 2) the owners of the US entity acquire at least 60% of the foreign corporation by reason of their stock ownership in the US entity; and 3) the foreign corporation and its expanded affiliated group (EAG) do not have substantial business activities in the foreign country of incorporation as compared to the total business activities of the group.

Miruna Enache Over the last decade, one of the main scrutiny items in tax audit cases (from a corporate income tax perspective) and the reason for tax disputes has been the deductibility of services expenses. The Romanian taxpayer has to prove its compliance with the legal requirements in this respect (having written contracts signed with suppliers and documentation to support the effective provision of the services as well as their necessity for its business). However, the tax authorities have become, in recent years, increasingly active and aggressive in this respect, focusing on intra-group administration and management expenses, where the legislation disallows the deduction of stewardship costs (including costs for administration, management, control, consultancy and other similar functions).

Pedro Fernández It may be a classic in other jurisdictions, but only recently has it gained momentum in the Spanish landscape, and it may well move to the top of the agenda of the Spanish tax auditors. Unlike the primary transfer pricing adjustment, for which there are more or less effective means to mitigate the potential double taxation, the secondary adjustment can easily lead to a final tax cost.

David Cuéllar Marco Nava On April 27 2011 Mexico and Peru signed a tax treaty, which is not yet in force and is still subject to approval.

Rajendra Nayak Ganesh Pai The Mumbai Tribunal in the case of Standard Chartered Bank (taxpayer) [2011-TII-80-ITAT-MUM-INTL] recently adjudicated on the taxability of data processing charges under the Indian tax law (ITL) and the India-Singapore tax treaty (treaty). The taxpayer is a non-resident, engaged in the business of banking through various branches in India. It entered into an agreement with a Singapore company (S Co) for receiving data processing support for its India operations. To provide the required support, S Co maintained a data centre at Singapore and made available a portion of its disc storage capacity exclusively for the taxpayer. S Co processed the raw data received from the taxpayer using certain licensed software on its mainframe computer and electronically transmitted the output data back to India in the form of reports as per the taxpayer's specifications. The taxability of the payments was to be adjudicated having regard to the definition of royalty under the ITL and the treaty, which includes within its ambit the consideration for the use of a process and payments for the use or the right to use industrial, commercial or scientific equipment (equipment royalty clause).

Costa Rican President Laura Chinchilla has made tax reform a priority since starting her four-year term in February 2010, with a view towards improving transparency and encouraging foreign investment. Yet the tax reform package her administration proposed has been stymied by opposition parties in Congress.

Sandra Benedetto B Cristián Bay-Schmith C Chile, Colombia and Peru have formally combined the operations of their stock markets to create the Latin American Integrated Market (Mercado Integrado Latinoamericano, or MILA) which has recently started operations.

Nélio Weiss Philippe Jeffrey On May 13 2011, the Brazilian Revenue Service issued Normative Instruction (NI) 1,154, with the aim of regulating the deductibility of interest and other general expenses paid or credited by a Brazilian source to individuals or legal entities considered related or resident or domiciled in a tax haven or in a jurisdiction under a privileged tax regime.

Anna Zafirova At present, Bulgaria is party to 68 treaties for avoidance of double taxation distributing the power to tax the income from the use of IP rights (royalties) between the contracting states. In this context, the amendments in the Copyright and Neighboring Rights Act adopted in March 2011 seek to clarify the position of holders of such rights, at the same time offering them an increased level of protection.

Drilona Likaj Earlier this year the Albanian government announced the intention to make amendments to the Income Tax Law. The changes would have been made in article 21 on non-deductible expenses and in article 28 on profit tax rate. The draft law has been prepared generally aimed at increasing taxation for the telecommunication sector (mobile and landline phones) and for the banking sector.