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In a strongly worded January 2003 report, the US Senate Permanent Subcommittee on Investigations stated that, by the end of this year, the SEC and US bank regulators should take action to preclude abusive structured finance transactions. The report applauds the use of structured finance to lower funding costs and diversify risk (true asset securitizations) but virtually demands the termination of false liability securitizations. False securitizations attenuate risk and hide assets and liabilities from investor and regulatory scrutiny.

Portugal will soon have a legal diploma foreseeing and regulating undertakings for collective investments in transferable securities (Ucits) under statute through the form of securities investment companies with variable capital (SICAV) and securities investment companies with fixed capital (SICAF).

The Shoura Council, a highly influential consultative group made up of some of the leading Saudi Arabian nationals, has rejected a proposed 10% income tax on foreign individuals. While, Saudi Arabia levies corporate taxes, it has traditionally not levied an individual income tax on expatriate workers. However, the country was considering levying a tax on expatriates as a means of reducing public debt and reducing the number of foreign workers in the hope that unemployed Saudi Arabian nationals would replace them.

In a recent case, a company domiciled and taxable in France owned the entire share capital of a company domiciled in Geneva. The Swiss subsidiary was solely set up to hold and administer securities and as such benefited from the so-called holding company privilege, a favourable tax status accorded by both the Federal and Cantonal tax laws. However, under the French Tax Code, section 209B (Controlled Foreign Company Rules or CFC rules), a French company's share in the income of a company domiciled abroad, in which the former holds a participation either of 10% or more or with a value of at least €22.8 million ($24.3 million), is added, for tax purposes, to its domestic (French) income, provided that the foreign company enjoys a privileged tax treatment at its domicile.

The understandable haste of Asian governments to create insolvency frameworks to revitalize their post-1997 economies has created as many problems as it has solved. Robert Zafft of the OECD and Lampros Vassiliou of Allens Arthur Robinson explain

In a significant development for Georgian tax legislation, the president of Georgia on April 19 2002 approved instructions outlining detailed procedures for the registration of taxpayers and the maintenance of a tax registry at district, zonal and regional levels (Decree 155). The instructions include forms to be filled out at the time of registration, reorganization or liquidation, and call for the collection of extensive information on taxpayers.

Japanese legal procedures relating to insolvency are undergoing substantial reform. As a part of these reforms, many amendments to the Corporate Reorganization Law were promulgated on December 13 2002 and are scheduled to take effect on April 1 2003. The pre-amendment Corporate Reorganization Law provided a very rigid reorganization procedure, especially for large-scale companies with many creditors, employees and other stakeholders. The main purposes of the amendments are to create a swift reorganization procedure for companies and to establish more flexible reorganizing measures.

According to a new notice recently promulgated in China, even if the capital contribution of all foreign investors of an enterprise is lower than 25% of the enterprise's registered capital, the approval and registration procedures of that enterprise will be the same as those of a foreign-invested enterprise (FIE). However, such an enterprise cannot enjoy the preferential tax arrangement that FIEs enjoy. If the investor pays its contribution in cash, it must pay off its capital contribution within three months after the business licence is issued. If the investor makes its contribution in kind, it must pay off its capital contribution within six months.

The revision of the exemption regulation that has caused problems for borrowers (see main feature) has also affected securititizations, putting billions of dollars of transactions temporarily at risk.

Life for foreigners issuing securities in The Netherlands has been made more difficult by a recent amendment to the law. Michael Evans reports on what lawyers are doing to change this