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German Chancellor Gerhard Schröder on April 26 2004 delivered a warning to the 10 new countries that joined the EU on May 1 2004 that the use of low corporate tax rates to attract foreign investment was unacceptable. Corporate tax rates in the 15 countries in the EU before May 1 2004 were about 10% higher on average than those of the 10 new members, prompting fears that older EU members would lose valuable foreign direct investment.

In a March 4 2004 decision, the ECJ held that France's taxation of certain types of foreign-source investment income is incompatible with the EC Treaty (case C-334/02, Commission v. France)

After a decade of pondering, the German tax authorities have issued a Directive defining their position on the classification of US limited liability companies (LLCs) as corporations or partnerships for German tax purposes (Directive of March 19 2004)

The UK Inland Revenue has announced that it will notify tax advisers when it is about to undertake an employer compliance review of one of their clients

The government released, on March 26 2004, a white paper aiming at improving the direct tax system

In the midst of considerable debate on the potential tax leakage from income fund structures, the Canadian government has introduced several changes affecting pension funds and non-resident investors in Canadian income funds. Income funds are tax-efficient structures that reduce or even eliminate entity-level tax. Investors hold units of a trust and are taxed on distributions from the trust. The 2004 federal Budget dampened the growing enthusiasm for such investments by penalizing certain classes of investors. Pension plans, which represent a significant pool of capital, are now subject to a monthly penalty tax when their investments in business income trusts exceed certain thresholds.

Some EU members have conformed with the Interest and Royalties Directive. Others will benefit from transitional arrangements. Philippe de Clippele and Benoit Verschueren of PricewaterhouseCoopers bring us up to date with the state of implementation

The governments of the UK and Gibraltar have challenged a European Commission (EC) finding that Gibraltar's proposed corporate tax reform measures are not compatible with EU state aid rules. The two countries could take their case to the European Court of Justice after the EC declared that Gibraltar's tax system should be the same as the UK's if it is to be regarded as part of the UK for EU purposes.

International tax and beneficial ownership intersect when royalty payments are made cross-border. But there is no consistent definition of beneficial ownership that everyone can use, says Carlos Vargas of KPMG

The special Canary Islands Special Zone (ZEC) tax regime has been in force since 2000 after authorization by the EU authorities. After being in effect for almost four years, this is a good time to weigh up and recall the main advantages and to analyze the level of success and attainment of its objectives.