zaterdag 21 november 2015

Savings taxation directive repealed

On November 10, the European Council repealed Directive 2003/48/EC on the taxation of savings income.

Brief Background
The 2003 EUSD, which originally came into effect on 1 July 2005, was introduced as an European approach to attacking banking secrecy. It provides a mechanism whereby EU Member States automatically exchange information about interest earned in one Member State by a resident of another Member State. Only Belgium, Luxembourg and Austria were entitled, during a transitional period, to levy a withholding tax at a rate of, currently, 35% in place of information exchange. Belgium switched, in January 2010, to the automatic exchange of information. From 1 January 2015, Luxembourg will apply the automatic exchange of information on interest payments made by a paying agent established in Luxembourg to individuals resident in another Member State. The first information exchange will take place in early 2016 with respect to interest payments made in 2015.

Although the legal scope of the EUSD does not extend outside the EU, certain jurisdictions, such as Switzerland, Jersey, Guernsey and the Isle of Man, have agreed to put in place legislation that supports the aims of the EUSD with bilateral agreements with all EU Member States. The EU savings agreements with Switzerland introduced equivalent measures, based around Switzerland paying agents withholding tax of 35% from certain payments to EU residents, with that tax  being (mostly) transferred to the Member States of residence of the taxpayer and being (fully) available as a credit or repayment in that Member State upon full declaration of the income by the taxpayer. To avoid the withholding tax, the account holder has an option of disclosure to the Tax administration of his Member State.

Amended EUSD

Since 2009, on the basis of a proposal presented by the European Commission in November 2008, the EU has broadly agreed on enhancements that need to be made to strengthen the EUSD, mainly by extending its product scope, adding rules for identifying the owners of interest and dealing with artificial or tax exempt intermediary structures. On April 15, 2014 the Council Directive 2014/48/EU of 24 March 2014, amending Directive 2003/48/EC on taxation of savings income in the form of interest payments was published. In addition to the wider range of financial products (this would include life insurance contracts, as well as a broader coverage of investment funds), the amended EUSD will also extend the scope of the savings tax rules to payments made to a significantly broader range of entities such as trusts and foundations.

The proposed amendments were approved by the European Council on 24 March 2014 with the adoption of Directive 2014/48/EU. Member States were now required to adopt the laws, regulations and administrative provisions necessary to comply with the amended EUSD by January 1, 2016. The automatic exchange of information concerning income from securities and life insurances, and concerning the interest payments to entities and legal arrangements would be effective as of January 1, 2017.

EUSD Repealed

The EUSD was repealed following the introduction of a series of measures aimed at preventing tax evasion, and because of developments that are to usher in automatic tax information exchange. In December 2014, the Council adopted Directive 2014/107/EU, which brings interest, dividends, gross proceeds from the sale of financial assets and other income, and account balances within the scope of the automatic exchange of information between Member States. The Directive provides for the implementation of the single global standard on the automatic exchange of information developed by the OECD. It will enter into force on January 1, 2016 and Member States will begin exchanging the information required by the end of September 2017. Austria will apply the Directive a year later than other EU Member States.


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