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Following the example of other European countries, Italy has adopted a special tax regime for the income deriving from the use of certain vessels, having a net tonnage higher than 100 tons, under the form of so-called tonnage based corporation tax (the Tonnage Regime), pursuant to the new articles from 155 to 161 of the Italian Tax Code (ITC), as amended. More precisely, the Tonnage Regime will enter into force as soon as:

Deduction of expenses by French subsidiaries, resulting from rebilling by foreign parent companies is likely to attract the attention of the French tax authorities. The latter may challenge the deductibility of these expenses pursuant to the specific provisions of section 57 of the French Tax Code: once the French tax authorities have proven that the French and the foreign companies are related parties, they only have to provide evidence of an advantage given to the foreign company in order for the transaction to be deemed abnormal.

On April 1 2004 the Australian federal government tabled legislation in parliament containing the most significant changes to emerge from the review of international tax arrangements. The proposals represent a major shift in the taxation of foreign income and will require a major rethink on tax strategies by Australian-based companies.

Under a Presidential Decree dated April 5 2004, the Mexican government exempts smaller companies from asset tax (a type of minimum tax). Smaller companies are those entities that earned less than Ps14.7 million ($1.3 million) in the preceding year and that own assets that are valued at (according to the asset tax valuation rules) less than Ps14.7 million.

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.

Parent companies could be liable for unforeseen charges if they fail to plan before using income from associated companies overseas, warn David Golden, Margie Rollinson, David Benson and Elizabeth Hale of Ernst & Young in Washington, DC

Jesus Barrios, director of taxes, Latin America for Oracle, says US and Japanese taxpayers need to be aware of two court decisions which could affect their businesses in Mexico

By Andile Pama, general manager: communications, South African Revenue Service

John Hobster, the former global CEO of Ernst & Young's transfer pricing practice who moved to Analysis Group in February 2003, has returned to the big four firm. Hobster rejoined Ernst & Young's London office as global head of accounts for transfer pricing and tax-effective supply chain management on April 6 2004. The move spells the end of Analysis Group's UK transfer pricing activities, which have been centralized, in the its Denver office.

Ken Bransom, the former head of Ernst & Young's US practice in Europe, has moved to Deloitte. Specializing in the US-European taxation of merger and acquisition planning and structured finance, Bransom joined Deloitte's London office on March 23 2004 and will work with a team of nearly 30 tax specialists led by Jeff Wehner that focuses on US companies with operations in Europe.