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capital gains tax; revaluation of assets and declaration of dividend; tax benefit; form and substance

Rajendra Nayak Ganesh Pai The Mumbai Tribunal in the case of Airlines Rotables Ltd, UK, the taxpayer, adjudicated on the issue of whether maintenance of stock of goods, belonging to the taxpayer, by its Indian customer results in the taxpayer having a permanent establishment (PE) in India, under the India UK tax treaty. The taxpayer a UK company, entered into an agreement with an Indian aircraft operator, the customer, for providing certain support services for the customer's aircraft. The agreement required the taxpayer to repair the component when it became operationally unserviceable and to replace the component during the interim period. To ensure adequate availability of the components, the taxpayer maintained stock of such replacement components at the operational bases of the customer in India, as well as in the UK at the taxpayer's main depot. The customer held the component stock only as a bailee (delivery of goods without transfer of ownership) at all times. The issue in dispute was whether the maintenance of the component stock constitutes a PE of the taxpayer in India under the UK treaty. Under the UK Treaty, a PE can be constituted, among other things, through a fixed place of business where the business of the foreign enterprise is wholly or partly carried on (Basic Rule) or through a dependent agent acting on behalf of the foreign enterprise in India, maintaining a stock of goods from which he regularly delivers on behalf of the foreign enterprise (Agency Rule).

Dieter Endres Those involved with tax groups in Germany often see the mechanism as clumsy, archaic and legally insecure. Accordingly, the governing coalition has undertaken to look at possible reforms in some detail. Anxious to push things forward, the provincial government of Hesse has summarised its ideas in a position paper for public debate. Its basic suggestion is to move from the present, rigid system of concentrating all profits and losses on the parent to a flexible system allowing group members to transfer their results with tax effect within the group. The main features of the proposal are:

Nicole Goulard Augustin Asselin The French Administrative Supreme Court decided on March 17 2010 that the stock option spread, equal to the difference between the market value of the underlying shares upon exercise and the exercise price of the options, is taxable in France "if the activity, that the grant of a stock option compensates, had been performed in France".

Since June 2008, when a broadened definition of low-tax jurisdictions (tax havens) was introduced by the authorities, taxpayers have been eagerly awaiting the enactment of an updated black list of tax haven jurisdictions for tax and transfer pricing purposes. The latest version of the black list was issued in August 2002.

Janne Juusela The Finnish government issued a Bill to the Parliament on April 9 2010 proposing a new Act on Personnel Funds (HE 44/2010). The aim is to make personnel funds as a means of rewarding employees more attractive to both employers and employees, and thereby increase employee participation in company profits. The new Act is proposed to enter into force on January 1 2011.

Andrés Edelstein Ignacio Rodríguez The Supreme Court of Justice issued an unpredictable opinion in mid-June in the Hermitage case questioning the constitutionality of the Argentine Minimum Notional Income Tax (MNIT).

Megan Lapwood and Mark Atkinson of Deloitte in Switzerland describe how cross guarantees and the overall flow of benefits derived within a multinational group from external funding may affect how guarantee fees should be charged.

The value added tax travel service margin scheme involves complex issues that concern businesses of all types, Stephen Dale of Landwell & Associés investigates the progress being made and how Europe might better develop the legal framework in this area.

Sergiy Melnyk of Salans in Ukraine describes how the new draft tax code in Ukraine constitutes a significant departure from previous international tax provisions in the country.