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Germany enacted many changes in its value-added tax (VAT) law in December 2003. Most, but not all, of the changes took effect on January 1 2004. A bare bones summary of the affected areas of VAT law is as follows:

On February 12 2004 Advocate General (AG) Kokott issued her opinion in the Weidert and Paulus case (C-242/03). According to the AG, the fact that Luxembourg grants an income tax investment allowance for investments in shares of domestic companies but not for investments in shares of non-resident companies violates the free-movement-of-capital principle (article 56 of the EC Treaty) because it puts investors in shares of foreign companies and foreign companies seeking Luxembourg investors at a disadvantage. Such a restriction cannot be justified by coherence of the Luxembourg tax system or by article 58 of the EC Treaty, which prohibits arbitrary discrimination or disguised restrictions on the free movement of capital.

The UK Inland Revenue launched a surprise attack on relief for trading losses through partnerships last week. Although the February 10 announcement did not specifically mention the film industry, which the government has repeatedly pledged to support with tax incentives, funding for many UK films was jeopardized.

The Chinese finance ministry has outlined a new unified corporate tax law, which aims to treat domestic and foreign corporations on an equal footing, effectively raising corporate income tax for foreign-invested enterprises.

On December 30 2003, the French Administrative Supreme Court rendered two important decisions with respect to French thin-capitalization rules.

Brazilian authorities have released new legislation that significantly increases the overall tax burden on import transactions in Brazil.

The new tax consolidation regime was to deliver simplicity and flexibility for business but a survey by PricewaterhouseCoopers Australia last year found that the environment for corporate transactions has become more, rather than less, complex.

The Bush Administration unveiled its 2005 budget proposal in February. It comes up with suggestions, but no solutions, for international tax issues, explain Margie Rollinson, David Benson and Michael Mundaca of Ernst & Young

A new decree allows non-German investors to invest in a German limited partnership without paying German income tax, but tax on carried interest remains. Dietgard Klingberg and Lars Lawall of PricewaterhouseCoopers explain

Effective January 1 2004, a new wording of the participation exemption has entered into force, correcting a troublesome requirement.