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As already mentioned in the March and May issues of International Tax Review, a significant tax reform is now being debated in the Spanish parliament in relation to personal income tax, corporate income tax and non-resident income tax, which will predictably come into force for the fiscal years commenced on or after January 1 2007.

The SICAR legislation is an example of how Luxembourg has modified its tax system in recent years to keep pace with and ahead of other EU member states in the competition for foreign investment, according to Rene Beltjens of PricewaterhouseCoopers

The corporate tax reform that is due to take effect on January 1 2007 includes a cut in income tax. The reform is aimed at helping the Netherlands compete better for foreign investment, explain Arne Kattouw and Roland Brandsma of PricewaterhouseCoopers

The Treasury Department and IRS, on July 31 2006, released the long-awaited regulations under section 482 on inter-company services transactions. The IRS also released an advance copy of Announcement 2006-50, providing a proposed revenue procedure that identifies particular services that are eligible to be charged at cost under the new regulations.

In a decision of May 31 2005, the Supreme Tax Court sided with the taxpayer in holding a long-standing group strategy to be a sufficient reason for the shareholding to qualify dividends to an intermediary holding company for treaty relief. This intermediary subsidiary had no staff of its own but was located in a country where the tax-haven parent had an active subsidiary The finance ministry has reacted to the case with the draft of a revised statute to tighten significantly the restrictions on treaty and EU directive shopping.

The UK tax authorities have succeeded recently in obtaining bank information about taxpayers it suspects of tax evasion through their offshore arrangements. Andrew Watt of Chiltern analyzes what the developments mean for the future of tax investigations

Guidance on the treatment of cost sharing as well as mergers involving foreign companies are two of the proposals in the US Internal Revenue Service's (IRS) and Treasury Department's Priority Guidance Plan that may affect international tax executives in the coming months.

Challenge us

On June 30 2006, the Ministry of Finance and Economy (MOFE) designated Labuan, Malaysia as a tax haven subject to new withholding tax rules intended to discourage treaty shopping.

The proposed and temporary regulations for the transfer pricing treatment of services transactions, which the US Treasury department and the Internal Revenue Service (IRS) issued in August, attempt to modernize regulations that have been around since 1968.