EU Savings Tax Directive

Please note we cannot provide tax advice under any circumstances. Individuals should refer to their tax advisor in this instance.

Background

The European Savings Tax Directive (EUSTD) is an agreement between the EU Member States to automatically exchange information with each other about customers who earn savings income in one EU Member State but reside in another. It was approved by the EU Council of Ministers on 3 June 2003 and came into effect on 1 July 2005.

Application of the Directive

Exchange of information - This means that, for example, where a resident of France holds a bank account in Germany, the German bank will provide to the German Tax Authorities details of the customer and interest payments on that account. The German Tax Authorities will then in turn provide that information to the French Tax Authorities. This is known as "automatic exchange of information" and enables the French Tax Authorities to compare the amount of income declared by that individual on his or her own French personal tax return with the information provided under the EUSTD.

Withholding tax - Although the EUSTD is centred on "automatic exchange of information", three EU Member States (Austria, Belgium and Luxembourg) have opted to apply a withholding tax instead. Under the withholding tax option, banks automatically withhold tax (the rate of which is 15% from 1st July 2005, increasing to 20% from 1 July 2008 and 35% from 1 July 2011) from interest paid to individuals resident in other EU Member States (but no information regarding individuals is provided to the Tax Authorities in either the State in which the individual is resident or the State in which the bank account is located). It is the Bank's responsibility to pay the withholding tax on behalf of the customer. Under the withholding tax option the jurisdiction must also offer to customers automatic exchange of information and/or a system whereby the customer obtains from their local tax authority a certificate which details the source from which the interest payment arises.

To help you, we've detailed below the questions we're being most frequently asked about in respect of the EUSTD. Just click on the question you are interested in to read the answer.

• How does the EUSD affect Jersey, Guernsey and the Isle of Man?
• I live in the UK but am non-domiciled for tax purposes. Does it affect me?
• If I opt for retention tax, can I get a certificate of interest to pass to the Inland Revenue?
• What details do you pass on if I opt for exchange of information?
• I travel around the world and have no fixed abode, I have a UK address for post to be sent to. How does this affect me?
• If I opt for retention tax - will you disclose my details?

For further information on the EUSTD please refer to your usual contact or click here to view a selection of additional frequently asked questions.

Please click here to ascertain whether you are in scope of the Directive and if so, what action you may be required to take.