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On June 30 2000, the US Treasury issued final regulations under section 894 regarding the availability of treaty benefits for US-source payments made to certain hybrid or fiscally transparent entities. Under the final regulations, a US-source payment to a fiscally transparent entity is generally not eligible for the reduced rate of withholding tax provided for under a treaty unless the payment is taken into account currently by a treaty country resident. The regulations only apply to US-source income that is not effectively connected with a US trade or business. The final regulations are effective for items of income paid on or after June 30 2000.

Pursuant to the Finance Bill 2000, the French tax authorities issued new guidelines (Inst. Adm. n°13 D 1 00, June 27 2000) commenting on the rules regarding the granting of rulings for tax-free spin-offs and split-offs (Apports partiels d'actifs and Scissions), as from January 1 2000. Under French tax law, it is possible to benefit from a tax deferral mechanism in the case of a demerger if certain conditions are met (among other things, the assets and liabilities contributed constitute a full and autonomous line of business; the company contributing the full and autonomous line of business undertakes to keep the shares received for three years; and commitments regarding the computation of future capital gains). When those conditions are not met, a ruling must be applied for to benefit from the regime. This is the case, for instance, when a foreign company contemplates contributing its French permanent establishment to a new French company.

The Singapore government aims to encourage hi-tech start-ups through its new Entrepreneurial Employee Stock Option Scheme. On offer is a 50% tax exemption, in addition to the already low corporate and personal income tax rates. By Linda Ng of White & Case LLP, Tokyo

US flow-through entities can now access reduced withholding tax rates in Mexico, while Mexican entities involved in a merger can use operating losses to secure a tax reduction. By Federico Aguilar, Nicolás José Muñiz and Jorge García, Ernst & Young, New York and Mexico City

Plesner & Grønborg

KPMG With more than 100,000 people collaborating worldwide, operating from 850 locations in 159 countries, KPMG is a leading global professional advisory firm. We turn knowledge into value for the benefit of our clients, communities and our people.

Gleiss Lutz Hootz Hirsch

Flick Gocke Schaumburg

The Dutch Ministry of Finance has announced the termination of its 1973 income and capital tax treaty with the Netherlands, in accordance with article 30 of the treaty. From January 2001 the treaty will no longer be in effect.

Germany’s tax reform programme was approved on July 14 2000. A package of tax rate reductions and a fundamental reform of business taxation aim to attract foreign investment. By Hans-Jürgen Hennig of PricewaterhouseCoopers, Frankfurt