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The Italian Tax Authorities issued on June 5 2003 ruling 123/E (the ruling) on VAT (value-added tax) group taxation in case of mergers involving the parent company of the group (the parent company). Company groups are considered differently under Italian law depending on the kind of taxes involved. The following will provide an outline of the current status of the law, as well as the changes that are envisaged in the near future.

Customs and Excise are cracking down on missing trader fraud (where a supplier in a chain of transactions fails to account for VAT and simply disappears), particularly in the computer chip and mobile telephone markets. This may lead to a person who is not involved in the fraud suffering a VAT cost.

Under the Indian tax law, an individual's tax status is that of a resident or non-resident. A resident individual is further categorized as a not-ordinarily resident or an ordinarily resident.

In a decision dated December 30 2002 (Conseil d'Etat, 236096, Hanna), the French Administrative Supreme Court had to interpret article 15 (dividends) of the France-Lebanon Tax Treaty in order to determine whether deemed distributed income as defined by French law was subject to tax in France when paid to a Lebanese resident for tax purposes.

The Canada Customs and Revenue Agency (CCRA) continues to provide favourable advance income-tax rulings for a common but attractive cross-border financing structure. The structure is used for the financing of a Canadian subsidiary by its US parent. It provides for a tax deduction in Canada and no immediate income inclusion in the US. It also results in a so-called double-dip if the US parent has borrowed the money used to finance the Canadian subsidiary, in particular a deduction of interest expense in both Canada and the United States.

New M&A rules, which became effective on April 12 2003, allow the involvement of foreign investors in domestic M&As for the first time. The new rules allow for acquisition of equity where the foreign investor purchases the equity of a domestic enterprise by agreement or subscription to the increased capital of the domestic enterprise, thereby transforming the domestic enterprise into a foreign invested enterprise (FIE); and acquisition of assets where a foreign investor sets up a FIE, and then purchases and operates the assets of a domestic enterprise or purchases the assets and uses them as investment in a newly established FIE.

Maria Eugenia Palombo of Klegal reviews the key transfer pricing cases in Italy and reveals the implications of the decisions

By Tobias Lintvelt, Koichi Sekiya and Jeff Hongo, Shin Nihon Ernst & Young, Tokyo

By Derek Alty, Jay Niederhoffer and Andrew McBride, Deloitte & Touche, Vancouver and Toronto

Gianni, Origoni, Grippo & Partners