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The first German tax court to address the much discussed issue of whether a computer server can constitute a permanent establishment has decided this question in the affirmative. In a case involving a German corporation with a server in Switzerland, the Tax Court of Schleswig-Holstein held in the autumn of 2001 that the server was a permanent establishment to which apparently substantial amounts of income should be attributed. Such income was exempt from German tax under the Germany-Switzerland tax treaty. The tax authorities contended that the taxpayer had no permanent establishment in Switzerland, hence its entire income was taxable in Germany. The tax court's judgment has been appealed to the Federal Tax Court.

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Spain has joined the increasing number of EU member countries that have established a special taxation system for shipping companies, based on the tonnage of the ships operated, instead of the standard system.

The US economy went into recession in March 2001. One year on, how and where is this reflected in transfer pricing? By Michael J McKee, Robert C Miall and W Scott McShan, Ernst & Young, North America and Europe

European countries losing vast sums of money each year to tax and customs fraud can perhaps take heart from the fact that the issue has not been forgotten by the European Commission (EC). As the UK's National Audit Office (NAO) released figures claiming that the country is losing between £6.4 billion ($9.1 billion) and £7.3 billion each year to fraud, the EC has adopted proposals for two programmes to help member states work together more closely to fight tax and customs fraud.

US trade relations with the EU are put under pressure following WTO ruling, new guidance on check-the-box procedures are issued and APAs come under the spotlight. Hal Hicks, David Benson and Margaret O’Connor of Ernst & Young, Washington DC, look at the latest developments on the US tax scene

Despite the state's aggressive reputation as a complex taxing regime, most California court cases are won and lost on the facts: this can give the taxpayer the advantage. By Eric J Coffill, Morrison & Foerster LLP, Sacramento

Ireland is continuing its efforts to be an attractive location for mobile international investors. New changes expected to be introduced the forthcoming Finance Act 2002 should continue this tradition. By Gary O’Mahony, Ernst & Young, Dublin

The UK has abolished ACT on dividends and on certain royalty payments, introduced onshore tax credit pooling rules and is now proposing certain tax-free disposals of substantial shareholdings. In light of this Tim Sanders and Fintan Clancy of Skadden, Arps, Slate, Meagher & Flom, London, consider whether the UK is the new Netherlands

The European Court of Justice (ECJ) recently rendered a decision on an interlocutory question asked by a Danish court regarding the notion of full line of business (ECJ, January 15 2002; C-43/00, Andersen og Jensen ApS). The decision of the ECJ could have repercussions for the application of the French merger regime.