Important changes to the EU Savings Directive
Does the EU Savings Directive Affect
You
This guide is for any individual clients who are residents of
the European Union ''EU'' Member States. Individuals resident for
tax outside the EU are generally not affected, although if you hold
a passport issued by an EU Member State you should also read
on.
A full list of the EU Member States, which of course includes
the UK, is provided at the bottom of the page. The Isle of Man,
Jersey and Guernsey are not part of the EU but individuals resident
in those jurisdictions are affected, as outlined in question 3
below.
As an initial guide, we have
produced two simplified EU Savings
Directive Flow Charts for Isle of Man
and Jersey
accountholders to help you identify whether you are
likely to be affected by the Directive. The forms A and B
referred to in the chart can be downloaded at the end of
this page.
The answers below attempt to address the most frequently
asked questions, but if you wish to speak to someone about your
personal circumstances, please call our client services team.
1. What is the EU Savings Tax Directive
(''EUSD'')?
At the European Council Meeting in June 2003, EU Member States
unanimously agreed that exchange of information, on as wide a basis
as possible, should be the ultimate objective of the EU, in line
with international developments.
It was, however, agreed that a limited number of named Member
States (Austria, Belgium and Luxembourg) would be allowed to
operate a transitional withholding tax, but these member states
agreed to implement exchange of information as soon as conditions
permit.
2. When did the EUSD take effect?
The EUSD came into force on 1 July 2005.
3. Does the EUSD affect the Isle of Man and
Jersey?
Yes. Within the framework of their constitutional arrangements,
the Member States committed themselves to ensuring the adoption of
the same measures in all of their dependent or associated
territories (for example, Isle of Man, Jersey, Guernsey and the
dependent or associated territories in the Caribbean).
4. So does it affect me?
Yes, if you are an individual resident for tax in an EU Member
State. If you are resident outside the EU but hold a passport
issued by an EU Member State then you should fall outside the scope
of the EUSD. However, you may be asked to provide proof that
you are resident outside the EU.
5. How will it affect me?
If you are affected by these rules, then the options available
to you under the directive will be dependant upon where your
account is held:
Jersey office
accountholders
You may choose either the exchange of information or withholding
tax option. Please note that the withholding tax option referred to
above will be known as the retention tax
option.
Under the retention tax option, any interest payments made to
you by us will be paid net of 35% retention tax. Unless you have
completed an exchange of information declaration (Form A),
retention tax (withholding tax) will automatically be deducted from
any credit interest applied to your account(s).
If you choose the exchange of information option, no tax will be
deducted from interest payments made to you, but details of the
amount of interest paid together with certain personal details will
be provided to the tax authorities (see question 6 below).
Isle of Man office
accountholders
All accounts opened in the Isle of Man will be opened on an
automatic exchange of information basis. The retention tax option
was withdrawn on 1 July 2011 following an amendment to Isle of Man
legislation.
6. How do I elect for exchange of
information?
Jersey office
accountholders
If you are affected by the EUSD you have the option to choose
the exchange of information option instead of suffering the
retention tax. If you choose exchange of information, then no
retention tax will be deducted from interest payments made to you.
Instead, we will provide only the following details to the Jersey
Tax Authorities (as applicable):
· Your name
· Your
address
· Bank account
number
· Details of the
level of interest received and
· The period to
which the interest relates.
The Jersey tax authorities will then, in turn, provide this
information to the EU Member State in which you are resident.
You can opt for exchange of information by downloading and
returning Form A at the end of this page.
Isle of Man office
accountholders
The exchange of information option is automatic for Isle of Man
office accountholders, and we will provide details to the Isle of
Man tax authorities as outlined above.
7. Will these changes mean that I should pay more
tax?
No. On the basis that you are already declaring the interest
income to your home tax authorities, these changes will have no
impact upon the overall level of tax that you pay. Even if you
elect the retention tax option (only available for Jersey office
accountholders), the 35% retention tax will be available for credit
(ie, offset) against your tax liability in the EU Member State in
which you are resident.
8. Does the EUSD just relate to bank
accounts?
No, the EUSD also extends to a number of other forms of
''savings income''. These other areas are interest from, and the
proceeds of sale or redemption of, certain bonds, and income from
certain types of investment funds.
9. How do these changes affect customer confidentiality
rules?
These changes will have no impact upon customer confidentiality
if you elect for the retention tax option. Under exchange of
information your details will be provided to the relevant tax
authorities as detailed above in question 6.
10. Is there any way to make this easier for
me?
Fairbairn Private Bank has several options available to you,
which may simplify your tax position and make the preparation of
your tax returns a much easier process. For bank account interest
there is a possibility to roll up the interest until closure of the
account rather than having this paid monthly or quarterly. This is
possible via our accumulation account range of
instant access or high interest accounts, and means that the
interest is only credited and therefore stated on your tax return
in the year that you decide to close the account. This may be at
any time of your choosing in the future, for example when you
retire, when your income level has reduced, or you change your
country of residence. Consequently, your tax returns will be
simplified and you can plan when you will pay the tax on your
savings.
Other options include holding your assets within an offshore
insurance bond, which, in many cases, can lead to tax savings that
more than justify the cost of this structure. Fairbairn Private
Bank has arrangements with a number of offshore bond providers and
will be happy to discuss your requirements. Alternatively, our
subsidiary company, Fairbairn Trust Limited, specialises in
providing discretionary trusts and / or
offshore company structures, which can be a highly effective method
of financial planning and are all structures outside the scope of
the EUSD.
11. Who can I contact for more information about my
personal circumstances?
You should always discuss your individual circumstances with
your tax adviser. For information on how Fairbairn Private Bank may
be able to help you, contact our client services team, or your
personal or private banker.
EU Member States: UK, Ireland, France, Germany,
Netherlands, Belgium, Italy, Luxembourg, Spain, Portugal, Greece,
Austria, Sweden, Finland, Denmark, Cyprus, Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia,
Bulgaria and Romania.
EU Savings Forms:
Existing clients can advise the bank of their personal
circumstances by downloading and returning the relevant form
below:
- Form A -
Exchange of Information
- Form B -
Exemption