EU Saving Tax Directive
The European Saving Tax Directive (STD) became effective on 1 July 2005 and applied to natural persons resident in an EU country on interest received on savings instruments, deposit accounts, etc. Currently, it does not affect interest paid to companies.
The Directive does not apply to persons (including EU Nationals) who are resident outside the 27 Member States of the EU.
The aim of the STD is a uniform ‘information exchange’ regime to apply across all EU member states. The new rules only apply to EU member states, but because the BVI, Anguilla, Turks & Caicos Islands, Cayman, Isle of Man and Channel Islands are UK dependent territories, they have also adopted and will implement the European Savings Tax Directive (STD).
There are two systems under STD: ‘information exchange’ and ‘withholding tax’.
1. Information Exchange: All countries agreed to report interest on savings paid to the citizens of other Member States to those States’ tax authorities. This would remove the possibility for citizens of the EU hiding the returns on their savings from their home tax authorities. Under the ‘information exchange’ system, the identity of individual recipients will be disclosed to their home tax authorities.
This proposal is at odds with the tradition of banking secrecy well-established in a number of Member States – e.g. Austria, Luxembourg, Belgium and Switzerland. These and several other countries adopted the ‘Withholding Tax’ system.
2. Withholding Tax: The Commission has had to allow Austria, Luxembourg, Belgium and Switzerland to apply a ‘withholding tax’ (at an “initial” rate of 15%). The Channel Islands and Isle of Man have had to join the STD, along with the Netherlands Antilles, Aruba and some European centres (Andorra, Monaco, Liechtenstein and San Marino). Most of these places also took the withholding tax route. When tax is ‘withheld’, the identity of the recipient will not be reported, thus preserving individual confidentiality.
Under the withholding tax option, banks and other paying agents will automatically deduct tax from interest and other savings income earned and pass it to their local tax authority, indicating how much of the total amount relates to customers in each Member State. The local tax authority will then keep 25% of the total amount collected and remit 75% to the various tax authorities within the Member States. The receiving country gets a bulk payment which is not broken down in terms of the individuals who are covered (thereby ensuring anonymity of the persons affected). The rate of withholding tax is 15% from July 2005, 20% from 1st July 2008, and 35% from July 2011.
Caymans and Anguilla opted for the exchange of information regime, and BVI opted for the withholding tax option.
The Table below shows which countries / territories have opted for the ‘exchange of information’ regime, and which have opted instead for the ‘withholding tax’ option (the latter preserves confidentiality of the affected persons). The EU Savings Tax Directive does not apply to offshore centres or other jurisdictions not connected to the EU.
If you are an individual (natural person) who is resident in an EU Member State, and earn bank interest or other savings income on deposits or investments held in your own name in another EU Member State, third country or territory included in the Table below: then it is likely that you will be affected by the STD.
If you are interested in making banking arrangements outside the territories affected by the STD, please Contact Us.
TABLE OF JURISDICTIONS AFFECTED BY STD
| Country/Jurisdiction | Status vis-a-vis EU | Regime to be applied | Comments |
| Andorra | Independent | Withholding Tax | Under the joint control of France and Spain |
| Anguilla | UK Dependent Territory | Information Exchange | |
| Aruba | Dutch Dependent Territory | Information Exchange | |
| Austria | Member State | Withholding Tax (15%) | Information Exchange by 2009 |
| Bahamas | Independent | Not covered by STD | |
| Belgium | Member State | Withholding Tax (15%) | Information Exchange by 2009 |
| Bermuda | UK Dependent Territory | Outside STD regime | Missed out by EU by accident |
| British Virgin Islands | UK Dependent Territory | Withholding Tax (15%) | |
| Bulgaria | Member State | Information Exchange | |
| Cayman Islands | UK Dependent Territory | Information Exchange | |
| Cyprus | Member State | Information Exchange | |
| Czech Republic | Member State | Information Exchange | |
| Denmark | Member State | Information Exchange | |
| Estonia | Member State | Information Exchange | |
| Finland | Member State | Information Exchange | |
| France | Member State | Information Exchange | |
| Germany | Member State | Information Exchange | |
| Gibraltar | UK Crown Colony | Information Exchange | |
| Greece | Member State | Information Exchange | |
| Guernsey | UK Crown Dependency | Withholding Tax (15%) | Known as a ‘Retention Tax’; the client can choose information exchange as an option. |
| Hungary | Member State | Information Exchange | |
| Ireland | Member State | Information Exchange | |
| Isle of Man | UK Crown Dependency | Withholding Tax (15%) | Known as a ‘Retention Tax’; the client can choose information exchange as an option. |
| Italy | Member State | Information Exchange | |
| Jersey | UK Crown Dependency | Withholding Tax (15%) | Known as a ‘Retention Tax’; the client can choose information exchange as an option. |
| Latvia | Member State | Information Exchange | |
| Liechtenstein | Independent but follows Switzerland | Withholding Tax (15%) | |
| Lithuania | Member State | Information Exchange | |
| Luxembourg | Member State | Withholding Tax (15%) | Information Exchange by 2009 |
| Madeira | Part of Portugal | Information Exchange | |
| Malta | Member State | Information Exchange | |
| Monaco | ‘Independent’ but under France | Information Exchange | |
| Monstserrat | UK Dependent Territory | Information Exchange | |
| Netherlands | Member State | Information Exchange | |
| Netherlands Antilles | Dutch Dependent Territory | Information Exchange | |
| Poland | Member State | Information Exchange | |
| Portugal | Member State | Information Exchange | |
| Romania | Member State | Information Exchange | |
| San Marino | Independent | Information Exchange | |
| Slovakia | Member State | Information Exchange | |
| Slovenia | Member State | Information Exchange | |
| Spain | Member State | Information Exchange | |
| Sweden | Member State | Information Exchange | |
| Switzerland | Affiliated to EU but not Member State | Withholding Tax (15%) | |
| Turks & Caicos Islands | UK Dependent Territory | Withholding Tax (15%) | |
| United Kingdom | Member State | Information Exchange | |
| USA | Outside EU | Has information exchange with Canada; undecided on EU regime |
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