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The German Tax Reorganization Act in force since 1995 permits three types of divisive reorganizations – split-ups, split-offs and drop-downs – without triggering tax, provided two principal conditions are met: any unrealized appreciation (hidden reserves) inherent in the assets transferred must remain subject to German taxation; and the assets transferred – and for split-offs the assets retained as well – must constitute a branch of activity, an interest in a commercial partnership, or a 100% share in a corporation. The latter requirement poses many issues. Until recently, the tax authorities interpreted the key term "branch of activity" in such a way as to severely restrict the options available to taxpayers when structuring divisive reorganizations.

Recent developments in the US courts, the IRS, and the WTO and OECD are looked at in detail

The UK has vetoed plans to introduce legislation on e-commerce taxation in the EU. The revised Swedish proposal would have made non-EU companies selling digitized products to EU consumers liable to value-added tax (VAT) on their sales. This would have levelled the playing field with their EU competitors who are already being charged VAT.

Germany’s Federal Ministry of Finance has changed taxation on the sale of and disregarded a recent court ruling for convertible and exchangeable bonds. By Florian Schultz, Linklaters Oppenhoff & Rädler, Frankfurt

The growth in global e-commerce is giving tax authorities and taxpayers the world over some major issues to contend with. This article looks at the Indian response to the challenge. By Ajay Mehra and Rakesh Jariwal, Arthur Andersen, India

The Malaysian government has lifted controls on foreign investment in the country. On May 2, Prime Minister Mahathir Mohamad announced the abolition of a 10% levy on repatriated capital gains for foreign investors in the equity market. The exit levy was initially introduced at a rate of 30% in 1999 in an attempt to stabilize the economy following the Asian financial crisis of 1997-1998. It was reduced to 10% in February 2000 and was payable on profits sent out of Malaysia after less than a year.

US Treasury Secretary Paul O'Neill has revealed that he wants to abolish corporation tax. In an interview with the London-based Financial Times, O'Neill states that in the future he would like to eliminate corporate income tax and capital gains tax for companies. The changes would not be considered until President Bush's $1.35 trillion tax cut has been enacted and social security has been looked at. In the interview, O'Neill refers to the present tax system as ?an abomination? and claims that George W Bush is also keen to change the tax code. Corporate taxes account for around 10% of federal revenues and O'Neill proposes to make up the lost revenue by increasing personal income taxes.

The Dutch government has decided to issue a new proposal for measures against dividend stripping. Dividend stripping refers to a transaction in which a shareholder transfers its right to receive a dividend to another taxpayer prior to the declaration of the dividend. In most cases, the underlying reason is that the transferor is not in a position to offset the (Dutch) dividend withholding tax against personal or corporate income taxes, whereas the transferee is allowed to offset this tax.

KPMG has set up a new team in New York to advise clients on Chinese tax law

Nik Mehta, a tax partner at Linklaters, has qualified as a solicitor-advocate. This position allows him to represent clients in civil cases in the UK's High Court. Linklaters contentious tax group was set up last year and comprises tax and litigation lawyers. There are six tax lawyers in the group. While a number of the litigation lawyers are solicitor-advocates, Mehta is the first tax lawyer to be awarded the title.