| 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.
(Please note this does not currently relate to the investment
return of Guaranteed Capital Equity Bond products).
Although the Isle of Man is not part of the EU, financial
institutions in the Isle of Man are also affected. Therefore
if you have clients who are resident in an EU country, Britannia
International will be required to either:
a) Apply a retention tax on 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 the customer’s home tax authority.
If your clients opt for exchange of information, their
interest will continue to be paid gross. If they opt for
the retention tax, no information will be exchanged under
the Directive but the tax will be deducted directly from
their interest payment.
Unless your clients 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 any of your clients are tax exempt and
hold a tax certificate from their relevant tax authority
they will not be affected by the Directive.
FREQUENTLY ASKED QUESTIONS
1.0 What is the EU Savings Tax Directive?
2.0 When did the Directive come
into force?
3.0 Who does the Directive affect?
4.0 Who is not affected?
5.0 What about residents of the Isle
of Man?
6.0 Are individuals who are resident
outside the EU but hold an EU Member State passport affected?
7.0 How are joint
account holders affected if one holder is resident in the
UK the other is resident outside the EU?
8.0 Are
GCEBs affected by the Directive?
9.0 For
those clients that will be affected by the Directive - what
will happen to their Britannia International account?
10.0 Will individuals have to pay
more tax?
11.0 What do customers need to do?
1.0
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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2.0 When
did the Directive come into force?
1 July 2005.
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3.0 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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4.0 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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5.0 What
about residents of the Isle of Man?
If your clients are resident in the Isle
of Man (or Jersey and Guernsey) they are not affected.
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6.0 Are
individuals who are resident outside the EU but hold an
EU Member State passport affected?
Any clients in this situation should fall
outside of the scope of the Directive but they may be required
to provide proof that they are resident outside of the EU
for tax purposes.
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7.0 How
are joint account holders affected if one holder is resident
in the UK but the other is resident outside the EU?
Interest paid to joint account holders is
apportioned equally. Therefore the interest paid to the
holder resident in the EU is subject to the retention tax
or, if preferred, exchange of information.
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8.0 Are
GCEBs affected by the Directive?
No. The investment return on accounts such
as capital protected structured products are currently out
of the scope of the Directive.
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9.0 For
those clients that will be affected by the Directive - what
will happen to their Britannia International account?
A retention tax will be deducted from interest payments
unless customers elect for exchange of information with
their 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 their
identity, residency and the interest they 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 they are resident.
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10.0 Does
this mean clients will have to pay more tax?
No. The Directive should have no impact
upon the overall level of tax that your clients pay. If
they choose the retention tax option, they can offset the
tax against their tax liability in their home EU Member
State. If they choose the exchange of information option,
their home tax authorities will be provided with details
of the interest they have earned.
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11.0 What
do customers need to do?
Your clients can indicate their choice
by completing our EU Savings Tax Directive Option Form.
This gives them the option of instructing us to exchange
information with their home tax authority or advising
us if they are tax exempt. If they do not return this
form to us, the retention tax is automatically applied.
To see the Option Form please click
here
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