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The Inland Revenue believes that the scope of tax legislation relating to offshore trusts is extraterritorial. Aileen Barry of DLA Piper Rudnick Gray Cary examines the basis of the claim and the action that should be taken

Legislation harmonizing its participation exemption rules with those in most European countries makes France an attractive jurisdiction for the establishment of a holding company, believe Isabelle Chauvet and Anne-Sophie Kerfant, of Shearman & Sterling

Companies in South Africa won some tax relief on February 23 2005 when Trevor Manuel, the minister for finance, announced in the 2005 Budget that the corporate income tax rate would fall from 30% to 29%.

The Arab Free Trade Zone came into effect on January 1 2005 marking the elimination of customs duty on intra-Arab trade. However, individual states will still have a "negative list" of trade items which will not qualify for exemption from customs duty. The Arab free trade zone currently comprises 17 member states: Saudi Arabia, Qatar, Bahrain, Egypt, UAE, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, the Palestine Authority, Sudan, Syria, Tunisia and Yemen. There is ambiguity on how the changes - with effect from January 1 2005 in case of intra-Arab trade- will be implemented as no procedural guidelines on the actual implementation have been issued yet. Imports from non-member countries will continue to be subject to customs duty based on the individual country's legislations. On January 1 2003, the Gulf Co-operation Council (GCC) countries (that is, Saudi Arabia, Kuwait, Oman, Bahrain, Qatar and UAE) formed a customs union removing the barriers to free trade between member states. A flat rate of duty of 5% is now imposed on most imported goods apart from listed exemptions at the first point of entry into the GCC. Those goods may then move freely between GCC countries without the imposition of any further duty. There is a 'transition' period of three years, until December 31 2005, allowing any teething problems to be ironed out.

The re-election of the coalition government has buoyed the business community with heightened expectation of further tax reforms, especially given its clear majority in the Senate from July 1 2005.

Last Tuesday on February 22 2005 O2, a UK mobile phone operator, released new software that separates business and personal mobile calls, helping tax directors comply with value-added tax (VAT) requirements.

Patrick Bignon, ex-global head of EY Law and former world-wide managing partner of Andersen Legal, has launched a new legal management and tax consultancy firm in Paris.

Companies in Europe will be able to recover value-added tax (VAT) on input expenses on share issues if the European Court of Justice (ECJ) affirms an advocate general opinion rejecting most European tax authorities’ position on the issue.

Pursuant to Council Directive 2003/48/EC of June 3 2003 each EU member state will be required to provide to the tax authorities of another member state details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other member state. The jurisdictions protecting banking secrecy (that is, Belgium, Austria and Luxembourg), however, will not immediately apply such a system of exchange of information, but may instead apply - for a transitional period - a withholding tax on savings income at rates rising over time to 35%.

After years of promising such a step, the Internal Revenue Service (IRS) has issued Revenue Procedure 2005-12 revising its pre-filing agreement (PFA) programme to provide for advance rulings on whether a taxpayer has a permanent establishment (PE) or a US trade or business (USTB).