1. European Tax Group Meeting Rajesh Sharma Smith & Williamson, London Amsterdam – 6 February 2009

2. Taxation of Foreign Profits Dividend exemption (for large and medium sized companies) Interest cap for large companies Anti-avoidance measures Reform of the controlled foreign company rules Treasury consents

3. Dividend Exemption Dividends including portfolio exempt from taxation (UK and non UK dividends) Exemption not available where the foreign dividend attracts a tax deduction or dividends where the payer achieved a reduction of UK tax. Subject to anti-avoidance provisions covers: –Dividends from controlled subsidiary –Dividends from non-redeemable ordinary shares –Dividends from portfolio holdings

4. Interest cap for large companies Restriction of interrest relief in the UK where UK borrowings from related parties exceed the net external finance cost of the non-UK members of the group. Disallowed Amount = Large company > 250 employees and turnover > €50m or assets > €43m Finance costs include derivatives, hedges, finance leases and foreign exchange costs. Total gross intra-group finance costs in the UK Net external finance costs (excl. UK expenses) of worldwide group Compensating adjustments for taxable receipts less

5. Interest cap for large companies – cont. Interest cap does not apply to banks and insurance companies. Interest cap applies to borrowings from related companies. ‘Gateway test’ for groups where the intra-group interest deduction of the UK group is less than half the total external interest cost. Overall, very complex rules!

6. Anti-Avoidance rules Loan relationships that have an unallowable purpose to be ignored for tax purposes. Loans where “the main” purpose for the loan is for tax avoidance purposes. Normally, loans on commercial terms should not fall within these provisions.

7. Controlled Foreign Companies Certain exemptions from CFC attribution to be reformed as a result of the new rules. Exempt activities test for holding or superior holding companies to be eliminated. Further reform anticipated over the next 24 months in light of the decisions in Cadburys and Vodafone cases at the ECJ.

8. Treasury Consents To be replaced with quarterly reporting requirements for transactions/events in excess of €100m. Sanctions for failure would be monetary rather than criminal under the current rules!

9. Initial impact Participation Exemption in Europe v UK rules? Simplification of the DTR rules. No need to structure capital redemptions or lend cash back to UK parent. Withholding taxes may result in tax and cashflow disadvantages until tax treaties are re-negotiated. This will take some time. Depends on the CFC reform package over next 24 months.

10. Rajesh Sharma Tel: 00 44 (0)20 7131 4181 Email: rajesh.sharma@smith.williamson.co.uk rajesh.sharma@smith.williamson.co.uk