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The European Union Savings Tax Directive came into effect
on 1 July 2005. Under this Directive, financial institutions
in countries of the EU will be required to exchange information
on the interest paid to customers who are resident in other
EU countries.
Although the Isle of Man is not part of the EU, financial
institutions in the Isle of Man are also affected. Therefore
if you are a customer resident in an EU country Britannia
International will be required to either:
a) Apply a retention tax on your interest
earned:-
- 15% from 1 July 2005 - 30 June 2008
- 20% from 1 July 2008 - 30 June 2011
- 35% from 1 July 2011 onwards
or
b) Exchange information on interest payments
with the Isle of Man tax authority who will forward this
information to your home tax authority.
If you opt for exchange of information, your interest will
continue to be paid gross. If you opt for the retention
tax, no information will be exchanged under the Directive
but the tax will be deducted directly from your interest
payment.
Unless you select the exchange of information option, the
retention tax will be automatically applied.
Please see below for frequently asked questions and answers
about the EU Savings Tax Directive.
You may also like to view this leaflet “Isle
of Man Guide to the European Union Savings Tax Directive”
produced by the Isle of Man Government.
Please note, if you are tax exempt and hold a tax certificate
from your relevant tax authority you will not be affected
by the Directive.
FREQUENTLY ASKED QUESTIONS
1 - Information on the Directive
1.1 What is the EU Savings Tax Directive?
1.2 Will I have to pay more tax?
1.3 When did the Directive come into
force?
2 - The effects of the Directive
2.1 Who does the Directive affect?
2.2 Who is not affected?
2.3 What about residents of the Isle
of Man?
2.4 I am resident outside the EU
but have an EU Member State passport. Am I affected?
2.5 I hold a joint account –
my wife is resident in the UK but I am resident outside
the EU. Are we affected?
2.6 What happens in relation to the
Directive if I live in the EU but am non-domicile?
2.7 How do I get a tax exemption
certificate?
2.8 What happens in relation to the
Directive if I’m an expatriate?
3 - The Directive and Britannia International
Accounts
3.1 Are accounts with Britannia
International affected by the new Directive as it states
‘customers of banks’?
3.2 I will be affected by the Directive
- what will happen to my Britannia International account?
3.3 What do I need to do?
3.4 Are there any accounts that are
not affected by the EU Savings Tax Directive?
3.5 Will statements show the deduction
of tax as well as interest paid?
3.6 Will the withholding tax be applied
monthly, quarterly or annually?
3.7 Where will my information in
relation to interest paid be sent to if I choose to exchange
information?
3.8 I have a Deferred Interest Account
– how will the Directive affect interest accumulation?
4 - Other questions
4.1 What is the specific number
of the directive?
4.2 What advice can you give me as
to the best option for me?
1 - Information
on the Directive
1.1
What is the EU Savings Tax Directive?
The Directive is an agreement between EU member states
to automatically exchange information about customers who
earn interest in one EU Member state but live in another.
Although the Directive is mainly concerned with the exchange
of information, three Member states have opted to apply
a withholding tax instead of exchanging information automatically.
Although the Isle of Man is not a member of the EU, it
is one of the UK Crown Dependencies, UK Overseas Territories
and other Third Countries who have voluntarily agreed to
apply the same or equivalent measures as the Directive.
The Isle of Man has also opted to apply a withholding tax
(known in the Isle of Man as a retention tax). Customers
who have bank accounts in the Isle of Man and who are affected
by the Directive will have a choice of paying the retention
tax or requesting their bank to exchange details of their
interest income to their home tax authorities.
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1.2 Will
I have to pay more tax?
No. The Directive is not a new tax and does
not involve you paying any more tax than you should currently
be paying. Any tax withheld can be offset against the tax
due by the tax authority where you are resident. This means
you do not pay tax on your interest twice. If you choose
the exchange of information option, your home tax authorities
will be provided with details of the interest you have earned.
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1.3 When
did the Directive come into force?
1 July 2005.
Top
2
- The effects of the Directive
2.1 Who
does the Directive affect?
Individuals who are resident in an EU Member
State.
You are considered an EU Resident if you reside in the
following EU Member States or Territories: Austria, Belgium,
Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal
(including Azores, Madeira), Romania, Slovakia, Slovenia,
Spain (including Balearics, Canary Islands), Sweden, United
Kingdom.
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2.2 Who
is not affected?
Individuals who are resident for tax-purposes
outside the EU. Accounts held in company names and by discretionary
trusts are also exempt whether they are resident in the
EU or not, however certain trusts such as interest in possession
and bare trusts may be affected.
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2.3 What
about residents of the Isle of Man?
If you are resident in the Isle of Man (or
Jersey and Guernsey) you will not be affected.
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2.4 I
am resident outside the EU but have an EU Member State passport.
Am I affected?
You should fall outside of the scope of
the Directive but you may be required to provide proof that
you are resident outside of the EU for tax purposes.
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2.5 I
hold a joint account – my wife is resident in the
UK but I am resident outside the EU. Are we affected?
Interest paid to joint account holders will be apportioned
equally. Therefore the interest paid to your wife will be
subject to the retention tax or, if preferred, exchange
of information. You will not be affected.
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2.6 What happens
in relation to the Directive if I live in the EU but am
non-domicile?
You will need to provide evidence you are
non-domiciled such as a letter from the local tax authority
or accountant.
Top
2.7 How
do I get a tax exemption certificate?
Your tax authority will be able to provide
a tax exemption certificate. Please ensure that the certificate
is valid and covers all your accounts with us.
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2.8
What happens in relation to the Directive if I’m
an expatriate?
The Directive is based on residency. If you are not tax
resident in the EU, you will not be affected.
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3
– The Directive and Britannia International Accounts
3.1 Are
accounts with Britannia International affected by the new
Directive as it states ‘customers of banks’?
Yes, Britannia International is registered
as a bank on the Isle of Man.
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3.2 I
will be affected by the Directive - what will happen to
my Britannia International account?
A retention tax will be deducted from interest payments
unless you elect for exchange of information with your home
tax authorities or are tax exempt. The retention tax will
be applied at the following rates:-
- 15% from 1 July 2005 - 30 June 2008
- 20% from 1 July 2008 - 30 June 2011
- 35% from 1 July 2011 onwards
If exchange of information is selected, details of your
identity, residency and the interest you have received over
certain periods of time will be provided to the Isle of
Man tax authorities who will then provide this to the EU
Member State in which you are resident.
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3.3 What
do I need to do?
If you have not yet completed our EU Savings
Tax Directive Option Form, please download a copy by clicking
here. This gives you the option of having the retention
tax applied, instructing us to exchange information, or
notifying us that you are exempt from tax in your home jurisdiction.
If no Option Form is completed, retention tax will be automatically
applied.
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3.4 Are
there any accounts that are not affected by the EU Savings
Tax Directive?
Accounts such as capital protected structured
products (commonly referred to as guaranteed capital equity
bonds) are currently out of scope of the Directive. Any
account which is set up in corporate names is also out of
scope. (Certain trusts such as interest in possession and
bare trusts may be affected).
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3.5 Will
statements show the deduction of tax as well as interest
paid?
Yes. Where tax has been deducted this will be clearly shown.
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3.6 Will
the withholding tax be applied monthly, quarterly or annually?
Withholding tax will be applied whenever
an interest payment is made.
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3.7 Where will
my information in relation to interest paid be sent to if
I choose to exchange information?
In the first instance it will be sent to
the Isle of Man tax authorities who will then forward it
to the tax authorities in your home country.
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3.8
I have a Deferred Interest Account – how will the
Directive affect interest accumulation?
Any interest accrued will be affected under the Directive
if you are EU resident at the time of closure (unless you
opt for exchange of information with your home tax authority
or are tax exempt) at the following rates:-
- 1 July 2005 - 30 June 2008 retention tax of 15% will
be applied
- 1 July 2008 - 30 June 2011 retention tax of 20% will
be applied
- 1 July 2011 onwards retention tax of 35% will be applied
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4
– Other questions
4.1 What
is the specific number of the directive?
2003/48/EC (Dated 3 June 2003).
Top
4.2 What
advice can you give me as to the best option for me?
We are unable to advise the best course of action for individuals,
and therefore suggest you seek independent tax advice.
Top
To
download a copy of the EU Savings Tax Directive Option Form
please click here.
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