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After losing out to its Asian neighbours in attracting a number of big investment projects, the Australian government has announced a new investment programme which includes tax incentives. Ian Dinnison, of KPMG, Melbourne reports on the new attractions

As the globalization of US multinationals proceeds at an ever-faster pace, tax planning opportunities can sometimes be overlooked. Capital restructuring is one such opportunity. Eli Fink and Eric Overman, Deloitte & Touche, New York examine the potential tax savings

Zeneca is to acquire a US fungicide business owned by Japanese chemicals company Ishihara Sangyo Kaisha. Zeneca will acquire ISK Biosciences and the international distribution rights outside Asia-Pacific. The deal is valued at $500 million. Davis Polk & Wardwell in New York is acting for Zeneca, with advice from tax partner Mario Verdolini and assistant Avrohom Gelber. KPMG is also advising.

Société Générale has acquired Hambros Banking Group from Hambro in a deal worth £300 million ($483 million). The banking group includes Hambros bank and its subsidiaries and associates, together with shareholdings in certain other companies. Société Générale was advised by tax partner Francis Sandison at Freshfields in London. Norton Rose acted for Hambro. Tax advice came from partner Louise Higginbottom and assistants Dominic Stuttaford, Nick Stretch and Mark Middleditch.

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.

The Spanish government is to privatize Aceralia, the leading steel group in Spain. The value of the transaction is Pta123 billion ($816 million), but this will increase to Pta137 billion on excercise of the over-allotment option.

The US natural gas utility KN Energy is to acquire gas pipeline company Midcon Corporation from Occidental Petroleum. The deal is worth $3.49 billion. KN has already spent $1.5 billion on acquisitions since 1989. The transaction will provide KN with more than 41,600 kilometres of pipeline in 15 US states, and boost annual revenue to $4.7 billion.

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.

Tax reform in Switzerland has revitalized the Swiss holding company regime. Peter Riedweg of Homburger Rechtsanwälte, Zurich looks at some of the regime’s new features, which include a capital gains tax exemption for qualifying participations

From: Jefferson VanderWolk