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In 1994, the Dutch Supreme Court ruled that a UK person legally entitled to receive dividends from a Dutch company could claim reduced Dutch dividend withholding tax of 15% under the UK/Netherlands tax treaty. The case in question involved a Luxembourg company that sold Shell dividend coupons to a UK market maker at 80% of their nominal value. Since the Luxembourg company was not entitled to the benefits of a tax treaty, it would otherwise have suffered 25% dividend withholding tax on dividends it received from Shell in the Netherlands.

Cravath Swaine & Moore is advising MCI WorldCom, the US's second-largest communications company on its acquisition of SkyTel, the wireless communications company. MCI will pay $1.8 billion for the company. The purchase will be made in stock and includes assumption of debt. The two companies have had business arrangements with each other for some time, and MCI WorldCom is the largest reseller of SkyTel services.

The original issue in the Parthenon case was the deductibility of interest on a promissory note distributed as a dividend. The Tax Court of Canada found it was not deductible, because the Canadian statutory interest deduction is limited to interest borrowed money and balance of sale of property, and this indebtedness fits neither category.

In a busy spring, the IRS has ruled on issues such as transfers of foreign stock and product grouping, and the courts have spoken on attorney-client privilege. Hal Hicks, David Benson and Marjorie Rollinson of Ernst & Young, Washington report on the latest developements

A tax reform in the UK Finance Bill threatens to harm the Eurobond market, lawyers are complaining. The Bill aims to close a loophole in the tax treatment of bonds redeemable at a premium over their issue price, but the lawyers worry that the reform extends beyond the loophole and will harm the tax treatment of standard bonds. The move comes while the UK government continues to campaign against the proposed EU withholding tax because of its claimed threat to the bond markets.

French finance minister Dominique Strauss-Kahn, and labour minister Martine Aubry have put forward a plan to introduce a surcharge on corporation tax and raise environmental taxes.

US firm Davis Polk & Wardwell is advising Morgan Stanley Dean Witter on its formation of an investment banking sales and trading joint venture in India, with the JM financial group.

Carter Ledyard & Milburn are advising UK group United News & Media on their acquisition of CMP Media, the US media group. United will add the Internet and print publishing businesses of CMP to its interests in PR Newswire and the UK's Channel 5 and other TV companies. The deal is worth $920 million. United News will pay $39 for each CMP share.

The Internal Revenue Service (IRS) has announced its intention in Notice 99-25 to postpone the effective date of the withholding regulations under IRC § 1441 and related provisions. Those rules will now apply to payments made after December 31 2000. Although the extension is primarily in response to the difficulties faced by financial institutions, the extension delays the reporting requirement for treaty-based related party transactions. Unfortunately, it also means that distributing corporations may not elect to reduce the amount subject to withholding if the company has inadequate earnings and profits before January 1 2001.

A recently reported advance ruling has clarified the scope of the term 'technician', as contemplated by section 10(5B) of the Indian Income-tax Act, 1961. Section 10(5B) grants tax exemption to a foreign technician, in as much as the tax paid on his remuneration by his employer for a period not exceeding four years, (commencing from the date of his arrival in India) is exempt, subject to certain conditions. Technician has been defined to mean a person having specialized knowledge or experience in construction, manufacturing or mining operations or generation of electricity or any other form of power or agriculture and allied activities or such other fields as are notified by the central government. To quote few instances - in Monte Harris, a person with experience in software development was accepted as a technician; in Arthur E. Newell, the act of perforation of films according to international standards was held to involve expertise, which would qualify the employee to be characterized as a technician; in David Kenneth White, a specialist who had expertise in telecommunication networks was accepted as a specialist on information technology.