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Italy, Spain, Sweden and Switzerland are not celebrated expatriate tax locations, but as the third and final part of this survey shows, they offer some hidden attractions, some planning opportunities, and present some pitfalls to watch out for

Friday the thirteenth of February was a memorable day for Colin Sharman. The global head of KPMG received a telephone call that ended plans to build the world's biggest accounting firm.

A special report prepared by Christopher Fitzgibbon of Deloitte & Touche, London

The entry into force in the US, on January 1 1997, of the IRS's final regulations under Section 301.7701 of the Internal Revenue Code (the so-called check-the-box regulations) requires a new analysis of the classification of Spanish legal entities.

Compaq Computers is to merge with Digital Equipment Corporation. The deal, valued at approximately $9.6 billion, is the largest in the history of the computer industry and will create the world's second-largest computer company after International Business Machines (IBM).

Failure by a member state to fulfil obligations — Directive 90/434/EEC — Failure to transpose.

Reed Elsevier is to dispose of its consumer magazine group IPC in a deal worth £860 million ($1.38 billion). The purchasing MBO group is financed by Cinven, with debt underwritten by Goldman Sachs. Freshfields acted for Reed Elsevier, with tax advice from partner Colin Hargreaves and manager Isabel de May.

Italy has introduced a dual income tax system, in the hope of overturning existing levels of capitalization. Paul Smith and Piergiorgio Valente of Ernst & Young, Milan, assess the benefits of the new system, and question the likelihood of a serious challenge to debt/equity policies

Arthur Andersen in Zurich provided tax advice on the merger of Zurich Insurance and the financial services division of BAT Industries (for prior coverage see ITR Dec/Jan 1998, p6). Tax partners Peter Athanas and Maja Bauer-Balmelli worked on the Zurich Insurance side of the deal.

A decision of the European Court of Justice shows that most EU member states have not correctly implemented the parent-subsidiary directive 90/435 of July 23 1990 (October 17 1996; Denkavit). A law of December 23 1997 is Luxembourg's response to this case law. Concerning the exemption of dividends received by a Luxembourg company, a participation of 10% of the subsidiary's share capital (or having an acquisition value of Lfr50 million) must be held for 12 months. This holding period may be satisfied before or after the relevant dividend distribution. Before 1998, a holding period of 12 months at the end of the year of distribution was required. No exemption was therefore available for dividends received by a Luxembourg parent from a subsidiary, the shares of which had been held for a long period of time, but were alienated before the end of the financial year. Despite the compliance with the holding period requirement of the parent-subsidiary directive, these dividends were taxable in Luxembourg.