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Carlos Casanovas, Gustavo Scravaglieri and Ariel Becher of Ernst & Young discuss how the country's thin-capitalization rules affect interest payments to foreign related parties

Mikhail Filinov Ilarion Lemetyuynen The current Russian tax system does not envisage a participation exemption regime for dividends received and realized capital gains. Dividends received from Russian companies are taxed at 9%, with a tax credit for underlying tax on dividends so that total tax applicable to dividends remains at the level of 9% irrespective of the number of Russian holdings in the ownership chain. Dividends received from foreign companies are subject to 15% tax with a credit for foreign tax withheld if an applicable double tax treaty so provides. To improve the image of Russia as a holding company jurisdiction for domestic businesses and avoid stripping of tax revenues from Russia, the legislators introduced elements of favourable holding regimes to Russian tax legislation and submitted a draft law to the parliament for this consideration.

In hindsight, November 1 2005 turned out to be a significant disappointment for the US tax community. The hand-over of the report of the Advisory Panel on Federal Tax Reform to the Treasury on that day was billed as the beginning of a process of simplification of the Internal Revenue Code.

KPMG member firms in Germany and the UK have announced a plan to merge to form a single entity, KPMG Europe LLP. Meanwhile, Deloitte has also announced a merger between its UK and Swiss member firms. While the two mergers are unrelated they do hint at a developing trend towards pooling tax resources in Europe.

Type of deal Valuer Acquirer Target Adviser to acquirer (tax) Adviser to target (tax) Acquisition €4.5 billion ($5.64 billion) Nycomed Group (Denmark) Altana Pharma (Germany) KPMG Christian Jänisch, Andre Müller (Germany) Andrew Bjoern (Denmark) Taunus-Treuhand Rolf Kozelka, Peter Werner (Germany)

Cadbury Schweppes was a UK resident company and the parent company of a group of companies, which included two subsidiaries that were resident in the Republic of Ireland, established in the International Financial Services Centre in Dublin and subject to a rate of tax of 10%. HMRC issued an assessment on the parent company on the basis that the UK's controlled foreign company (CFC) legislation applied. Cadbury appealed arguing that the legislation was contrary to EU law. The case was referred to the European Court of Justice for a preliminary ruling.

Tax reform may be needed to abolish taxes that are distorting the economy, report Andrés Edelstein and Gustavo Wunder of PricewaterhouseCoopers

Rob Withecombe Grant Thornton's management reshuffle in the UK, involving the promotion of Rob Withecombe to head of tax, Ian Evans to a newly created role of global head of tax, and Francesca Lagerberg as a partner to lead the firm's National Tax Office, signals a move to put tax advice at the heart of the practice.

No imminent changes to the Internal Revenue Code may be good for the rest of us, believes Chris Wales

Nélio Weiss Philippe Jeffrey Following the publication of the Federal Decree 5922 on October 4 2006, the tax treaty for the avoidance of double taxation and the prevention of fiscal evasion concluded between Brazil and South Africa has entered into force. The provisions of the treaty will apply as of January 1 2007.