MADEIRA Constitutional Court of Portugal has declared the unconstitutionality of the law requesting the anticipative payment of an advance on Portuguese corporate tax (PEC, for its initial in Portuguese) Following its verdict dated September 29, 2009, the Constitutional Court of Portugal has declared the unconstitutionality of the law requesting an advance payment on Portuguese corporate tax (PEC, for its initial on Portuguese), which as you know, all companies licensed to operate in the International Business Centre of Madera (CINM) were subjected to. The source of the unconstitutionality can be found in the request for an anticipated payment of an advance on Portuguese corporate tax to which companies of Madeira are not subjected. It is important to note that insofar as the payment of the PEC was applied during several years, the Court devoted the non-retroactive effect of its verdict because a refunding of the sums previously paid would imply substantial administrative costs. Consequently, the Court has specified that its judgment will only have effects for the future. However, the principle of non-retroactivity will not be applicable in cases of a dispute that has arisen prior to the judgement of the Constitutional Court but for which a decision has not yet been taken by a Portuguese court or concerning decisions that are still pending. Consequently, and in accordance with the case law developed here before, the amounts paid are not recoverable. SPAIN Special Fiscal Regime for Patents On February 13, 2008, by virtue of the rules on state aids, the European Commission authorized the special fiscal regime applicable to the income generated by the cession of patent licences, designs, models, plans, secret formulas and processes of Spanish companies and permanent establishments.  This special regime was introduced by Law 16/2007 of July 4, 2007 and complemented with Article 23 of the Corporate Income Tax Law.  According to this new regime, 50% of the income from the above mentioned licences will not be included in the taxable base when the prerequisites specified in this article are met.  It must noted that this exemption is applied to gross income and hence expenses inherent to the development (amortizations) are deductible, making the effective tax substantially low.    The rules allow applying this regime to intra-group transactions, even when the patent’s beneficiary is in the same country.   This regime is applicable as long as the income from the intangible assets cession licenses do not exceed six times the expenses incurred to develop the patent.  Fiscal Modifications Capital Gains Tax: The capital gains tax has been eliminated as part of the Economic Stimulus Plan, as of 2009 income tax filings.  VAT Return: For companies that voluntarily request it, VAT return could be done on a monthly basis, instead of annually as has been done so far. CHILE Holding Companies Regime Article 41D from Chile’s Income Tax Law introduced a special fiscal regime applicable to companies whose activities are exclusively as holding companies. These companies, called Investment Platforms, have legal personality, fiscal domicile in Chile and are exempt from income tax.   Companies under this law benefit from Chile’s  double taxation treaties.   This special regime created in 2001, is not well known because it is under a process of adaptation / clarifications thanks to the Administrative Law office of Chile’s Internal Revenue Services.  The most important issue of this special regime is the total income tax exemption for companies exclusively dedicated to participate and manage their subsidiaries.  This means, that these companies, besides the income from collecting dividends that is exempted, may also invoice their own subsidiaries for support administrative services.  The income from this source is also exempted from corporate income tax. The company is not exempted from the other taxes, such as VAT, Territorial Tax, Municipal Patents, and Inheritance and Donations tax.  In the case of VAT tax, the company may request its reimbursement as long as its foreign subsidiaries cannot deduct it and they do not introduce products or services to Chile as their main activity. Chile begins to enjoy a wide range of fiscal treaties.  Currently it has 14 treaties approved:  Argentina, Brazil, Canada, Croatia, Denmark, Ecuador, Spain, France, Mexico, New Zeland, Norway, Peru, Poland, South Korea, Sweden, and the United Kingdom; and the following on ratification phase: Belgium, Colombia, Ireland, Malasya, Paraguay, Portugal, Russia, Switzerland, and Thailand.  Currently under negotiations are the tax treaties with: Australia, Austria, China, Cuba, Finland, Hungary, India, Italy, Kuwait, the Czech Republic, The Netherlands, the United States, Uruguay, and Venezuela. BELGIUM With its goal of attracting investors and companies looking for maximum tax advantages using Belgium holding companies (known as investment platforms), the government of Belgium has issued important laws: 1. It eliminated the capital tax since January 2006. From that date on, capital increases are tax free for Belgium holding companies. 2. It issued a law on June 22 2005 , published it on October 3, 2005; later on modified it on December 23, 2005; and finally published it on December 30, 2005 which implements the ‘risk capital’ concept. This law allows deducting a percentage of the company’s own funds as expenses; hence reducing its tax base. This percentage is variable and indexed on the Government 10-year obligations’ rate of return. Currently, this figure is around 4%. This means that the 1.7% tax applicable to holding companies (refer to our December 2005 note) is reduced or even eliminated depending upon the amount of the company’s own funds. 3. The dividends withholding tax has been eliminated for all countries which have signed double taxation treaties with Belgium. Hence, under certain circumstances, there is no tax cost for dividends paid from a Belgium holding company and its partner located on a jurisdiction with a tax treaty.

URUGUAY Its joining to MERCOSUR and its need to fiscally regulate its economic relations with other countries (Spain, among others, which currently invests heavily in this country) has pushed Uruguay to undertake the deep fiscal reform that its Parliament approved and was put in placed in July 2007. Roughly, we may highlight the following items: 1. Personal income tax is established at a maximum of 25%. 2. Corporate tax is kept the same. 3. The territorial tax system is kept. 4. Starting January 1, 2007, the SAFI regime, characterized for carrying out activities abroad, disappears. Existing SAFI companies, with its current advantages, will be kept until 2010 when they must be turned into SA regular companies. 5. SA companies keep bearer shares and the government eliminates the ruling that obliged to apply the SAFI regime when its activities were outside the country. Hence, regular SA companies may carry out any activity, including foreign activities. This allows substituting a SAFI for a regular SA or SRL company; for which taxation has changed with the implementation of the fiscal reform. 6. Investment companies are kept under article 47 of Law 16.600 and may only carry out investment or non-commercial activities. We believe that this tax reform will put Uruguay in the framework of OECD general recommendations and hence ease the signing of tax treaties.

PORTUGAL Portugal continues its efforts of cleaning its heavily borrowed public finances. The fiscal policy and President Sócrates expenses reduction campaign are starting to show results; even though the VAT increment has affected internal consumption on the short run. Public expenses restrictions provide expectations for more attractive tax policies in the short run. Actually, according to information obtained by IGMASA MANAGEMENT, the Government still keeps its project of setting the company tax at 20% + 2.5% (22.5%). It is expected that this tax cut be in the near future, benefiting the Portuguese economy.

MADEIRA Regarding the Madeira regime, the European Commission approved tax reductions for the free zone of Madeira for the period 2007-2013. The European Commission has approved under EC Treaty state aid rules a scheme providing tax reductions worth ¤300 million until 2020 to companies setting up in the free zone of Madeira between 2007 and 2013. The Commission was satisfied that the aid was intended to promote regional development in Madeira enabling companies established in this outermost region to overcome their structural handicaps. The free zone of Madeira comprises an industrial free zone, an international services centre and an international shipping registry. New companies licensed to carry on business there between 1 January 2007 and 31 December 2013 will benefit from a reduced tax rate of 3% in 2007-2009, 4% in 2010-2012, and 5% in 2013-2020. Access to the scheme will be restricted to companies that meet specific eligibility criteria based on the number of permanent jobs created. Tax benefits will be limited by a ceiling placed on the taxable base per company which ranges from ¤2 million (where less than three new jobs are created) to ¤150 million (where more than a hundred new jobs are created). Besides, the companies will have to start operating within a fixed time limit: six months in the case of international services and a year for industrial and shipping activities. Admission to the free zone of Madeira is also restricted to the activities included in a list drawn up by the Portuguese authorities on the basis of the statistical classification of economic activities in the EU. As under the previous scheme, authorized by the Commission on 11 December 2002, financial and insurance intermediary activities, financial and insurance auxiliary activities and intra-group services (coordination, accounting and distribution centres) are excluded. For companies established before 2001 the same conditions applied; except if the regional government rules differently in labor related matters.

ANDORRA This small Principality has decided to protect its strategic position and develop its activities abroad. It started negotiations with France and Spain aiming to a tax treaty to regulate its economic activities abroad. It has also started a deep tax reform. Along these lines, the ISI and IMI (jointly similar to VAT) and the inheritance tax are already in place and the capital gains taxes was implemented on January 1, 2007. The Government is currently working on a reform to the company law, filing, and mandatory accounting that is expected to be in place soon. The Government is also drafting a law for company tax to be implemented between 2008 and 2009 .