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Henry Sless, Head of Global Financial Services Tax

Neville Bramwell, London

Sixth VAT Directive – Article 26(2) – Special scheme for the taxation of travel agents and tour operators – Taxable amount – Margin – Total amount to be paid by the traveller.

Sixth VAT Directive – Article 13B(b) – Exempt transactions – Letting of immovable property – Meaning – Cigarette vending machines installed in commercial premises.

Sixth VAT Directive – Article 9(2)(e) – Place of taxable transactions – Fiscal connection – Advertising services.

Sixth VAT Directive – Deduction of input tax – Possibility of opting for taxation of the letting of immoveable property – Abolition – Adjustment of deductions – Applicability to current leases – Protection of legitimate expectations.

As announced in our April 2003 international update, the Swiss federal tax authorities have issued on May 6 2003 an information letter (Rundschreiben) regarding taxation of stock options in Switzerland. This letter has a significant impact on the tax treatment of stock option plans in Switzerland. We believe that it is important to analyze the impact in detail for the issuing company and the individuals receiving stock options, as there are significant potential tax and social security saving opportunities.

The government announced several measures to relieve the financial pressure due to the adverse SARS effects. One way is to provide salary taxpayers with a tax rebate equal to half of the salaries tax paid for the year of assessment 2001/02 subject to a ceiling of HK$3,000 ($384). Taxpayers are not required to apply for the refunds. The Inland Revenue Department (IRD) will automatically work out their rebate amounts, and send the cheques to them by post. About 1.3 million refund cheques will be issued, and taxpayers will receive the refund from July 10-31 2003.

The Spanish framework for research and development (R&D) and innovation activities has traditionally been extremely advantageous, especially with regard to tax incentives, advantages which have been enhanced by a recent reform.

In a recent judgement (CIT v Vijay Ship Breaking Corporation and others [2003] 181 CTR 134), the Gujarat High Court has held that an Indian buyer is required to withhold tax from the usance interest paid to foreign suppliers.