EU Savings Tax Directive FAQs

1. What is the EUSTD?

The EUSTD is an agreement between the EU Member States to exchange information with each other about customers who earn savings income in one EU Member State but reside in another. It came into effect in July 2005.

2. How does the EUSTD work?

The directive can be applied in two ways:

Exchange of information

"Automatic exchange of information" means that, for example, if a resident of France holds a bank account in Germany, the German bank will give the German tax authorities details of the customer and the interest payments.

The German tax authorities will pass these on to the French tax authorities. They can then compare the amount of income declared by that person with the information provided under the EUSTD.

Withholding tax

Rather than using automatic exchange of information, 3 EU member states — Austria, Belgium and Luxembourg — have opted to apply a withholding tax instead.

This means that banks automatically withhold tax from interest paid to people resident in other EU member states. But no information is provided to the tax authorities in either state.

It is the bank's responsibility to pay the withholding tax. Under this system, the customer must also be offered automatic exchange of information or a certificate from their local tax authority giving the source that the interest payment comes from.

3. Which countries does the EUSTD apply to?

Member states of the EU that are applying the EUSTD are:

• UK
• Ireland
• France
• Germany
• Netherlands
• Spain
• Portugal
• Italy
• Greece
• Denmark
• Sweden
• Finland

• Estonia
• Latvia
• Lithuania
• Poland
• Czech Republic
• Slovakia
• Hungary
• Slovenia
• Malta
• Cyprus
• Bulgaria
• Romania

Non-EU countries that are effectively abiding by the directive are:
Antilles, Gibraltar and dependent territories in the Caribbean (including Cayman Islands).

Countries that will be applying Withholding Tax (called Retention Tax in non-EU countries) are:

• Andorra
• Monaco
• Liechtenstein
• San Marino
• Belgium
• Luxembourg
• Austria
• Switzerland
• Jersey
• Guernsey
• The Isle of Man

4. How does the EUSTD affect Jersey, Guernsey, the Isle of Man and Gibraltar?

Although these locations are not part of the EU, they apply similar provisions to the EUSTD. Jersey, Guernsey and the Isle of Man offer a withholding tax known as a "Retention Tax". Gibraltar doesn't offer the withholding tax option. See How does the EUSTD work?

5. Does the EUSTD just relate to bank accounts?

No, it extends to other forms of savings income. It affects:

• interest paid or credited to accounts
• interest rolled up when the balance is repaid
• interest paid out on debt-claims (this includes all UK government securities and certain other types of bonds)
• interest accrued and paid out on debt-claims when such claims are sold
• distributions made by certain unit trusts and other open ended collective investment funds which have invested more than 15% of their investments in debt claims
• accumulated income paid out when units in certain collective investment funds that have invested more than 40% of their investments in debt claims are redeemed repaid or sold (this will reduce to 25% from 2011)

6. Do companies come within the scope of the directive?

No. The directive only applies to individuals. Legal entities and entities whose profits are taxed under the general arrangements for business taxation are not affected.

7. Do partnerships come within the scope of the directive?

No. domestic partnerships, foreign partnerships and limited partnerships are considered to be entities whose profits are taxed under the general arrangements for business taxation, so are not affected by the directive.

8. Do sole traders come within the scope of the Directive?

Yes. The directive applies to individuals, so sole traders are in scope.

9. How does the directive affect trusts and trustees?

It depends. If the trustee is a corporate or not resident in an EU member state they are not subject to the directive.

However, if a beneficiary has the immediate and absolute entitlement to the trust income and is resident in an EU member state, the trustee will be deemed to be the paying agent if he is resident in Jersey, Guernsey, the Isle of Man or Gibraltar.

The beneficiary will be the recipient of the income which, if savings income arising at trust level, will be within the scope of the directive.

10. Are personal representatives and executors affected by the EUSTD?

No. Interest earned on funds held in the estate of a deceased person during the Administration or Executorship is out of scope of the directive until the funds are assigned to a beneficiary in an EU Member State.

1. How does the EUSTD affect my offshore accounts?

If you are one of the people who fall under the scope of the EUSTD (see Does the EUSTD affect me?) and have a bank account in the Isle of Man, Jersey or Guernsey, interest will be paid to you minus 20% Retention Tax.

Alternatively, you can opt for exchange of information. This means that no tax will be deducted from your interest payments, but we will give the relevant tax authorities details of:

• your identity
• your residence
• the level of interest your receive
• your account number/security which gave rise to the interest payments

They will then give this information to the EU member state in which you are resident.

If your account is held in Gibraltar, exchange of information will automatically apply. If you hold accounts in both Gibraltar and the Isle of Man, Jersey or Guernsey, then exchange of information will automatically apply to all accounts.

2. What if I have an investment in Lloyds TSB International Funds?

Some investment schemes do come within the scope of the directive. However, as dividends and redemption payments are indirectly made by Lloyds TSB International Fund Managers Limited from outside the EU and Crown Dependencies, we do not retain tax from these payments or exchange information about them.

3. Will my Equity Linked Offshore Limited Edition Deposit (OLED be affected by the EUSTD?

We believe that these types of products won't be affected by the directive. However, this may change.

4. Is Lloyds TSB International Limited offering any products that fall outside the scope of the directive?

To find out what products best suit your needs, speak to your usual contact.

1. Does the EUSTD affect me?

You are in the scope of the EUSTD if you:

• are a resident in an EU member state
• earn bank interest on an account held in the Isle of Man, Jersey, Guernsey or Gibraltar

If you are resident outside the EU then you should fall outside the scope of the EUSTD even if you have a passport from an EU member state.

If you are resident in the UK but were born elsewhere, you may be non-domiciled for tax purposes on income not remitted into the UK.

2. I am a non-EU national living in the EU, does the EUSTD affect me?

Regardless of your nationality, you'll be affected by the directive if you have savings products in another EU country, or in some other countries including Jersey, Guernsey, the Isle of Man, Gibraltar and Switzerland.

3. Although I am resident in the UK, my offshore interest is only liable to UK income tax on a remittance basis. Does the directive affect me?

If you reside in the UK but have non-domiciled status there, the EUSTD may apply. You must advise us of your tax status by contacting the helpdesk on 0870 609 1869 (or +44 (0)870 609 1869 from overseas) or your relationship manager. Helpline opening hours are Monday to Friday, 9am to 5pm UK time.

4. Although I reside in an EU country, I pay income tax outside the EU. Does the Directive apply to me?

It may not, but you must let us know about your situation. Contact the Helpdesk on 0870 609 1869 (or +44 (0)870 609 1869 from overseas) or your relationship manager. Helpline opening hours are Monday to Friday, 9am to 5pm UK time.

5. I am an EU national living outside the countries that apply the EUSTD. Does the Directive affect me?

No, you are not affected.

6. I am a resident in the EU but hold accounts outside of the countries that apply the EUSTD. How does the directive affect those accounts?

Your accounts are not affected by the directive.

7. What action do I have to take to comply with the EUSTD?

If you are in scope of the directive and your account is held in the Isle of Man, Jersey or Guernsey, you have two options:

• opt to exchange information — interest payments are reported to the tax authority in the EU country in which you reside. For this to happen, you need to complete an Exchange of Information Authority.
• do nothing — Retention Tax will then be applied. This will automatically happen if you hold accounts in Gibraltar or in both Gibraltar and the Isle of Man, Jersey or Guernsey.

8. Can I change between paying Retention Tax and exchanging information?

You can, but we'll need your written consent. If you are paying Retention Tax, and the tax has already been paid by the time we receive your written consent to exchange information, it may not be possible to reclaim it.

If you change your choice to exchange information, this will be based on the full financial year and won't take into account any previous deductions of Retention Tax in that year.

9. How will interest be apportioned for joint accounts?

Interest will be apportioned equally between parties.

10. I have a joint account with someone who resides in a country outside the EU. How does the directive affect us?

If one person is in scope of the directive but another person on the same account isn't, the tax will be taken or information exchanged only on the portion of interest that applies to the person who is in scope.

11. What if the Retention Tax is wrongly taken from me?

If the residential address we hold for you is incorrect and tax has been deducted from your account when you are not in scope of the directive, the tax will be repaid into your account as soon possible.

12. I am registered Not Ordinarily Resident (NOR). Does this exclude me from the directive?

No. If your residential address is in an EU Member State then regardless of the fact you have signed a NOR declaration, the Retention Tax will apply to your interest payments unless you have opted for exchange of information.

13. I already declare the income from my savings in my country of residence. What do I need to do?

If you want to continue to receive interest without Retention Tax being deducted, opt for exchange of information. If you do nothing and the tax is deducted we can provide a certificate of interest paid so that you can claim a refund or tax credit from your home tax authority.

14. Is there a minimum amount that has to be earned before the Retention Tax is levied?

No, there is no minimum amount.

15. How do I opt for exchange of information?

You need to complete an Election to Disclose form. If you haven't already received one, contact our helpdesk on
+44 (0) 870 609 1896.

16. Does the EUSTD mean I have to pay more tax?

It shouldn't do. If you're already declaring interest income to your home tax authorities, the EUSTD shouldn't have any impact on the overall level of tax that you pay.

If you get a retention tax deducted from your income, you can offset this against your tax liability in the EU member state in which you are resident.

17. Does the EUSTD affect customer confidentiality rules?

If your account is held in the Isle of Man, Jersey or Guernsey, the EUSTD won't have any affect on customer confidentiality unless you choose the exchange of information option.

If your account is held in Gibraltar, exchange of information will be provided to the Gibraltar tax authorities. If you hold accounts in both Gibraltar and the Isle of Man, Jersey or Guernsey, exchange of information will apply to all accounts.

18. Will the Retention Tax always be in place or at a later date will you have to disclose all my details?

The Retention Tax is a transitional arrangement, but no date has been set to move entirely to exchange of information. These arrangements are likely to be in force for a considerable number of years.

19. Can you offer me any tax advice as to what would be best for me?

No, we are not qualified to offer tax advice. We recommend you consult your tax adviser.

20. If I opt for Retention Tax, can I get a certificate of interest to pass to the Inland Revenue?

Yes. Let us have your request in good time for you to include the certificate with your tax return.

21. 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 you don't have a tax authority you won't be subject to Retention Tax — but it's very rare for anyone not to have a tax authority. Even if you are not paying tax, you probably do have one. It will be down to you to prove you do not have one by sending us confirmation from your tax adviser or previous tax authority.

22. Where can I go to find out more?

Speak to your relationship manager or call the helpdesk on 0870 609 1869 (or +44 (0)870 609 1869 from overseas). Helpline opening hours are Monday to Friday, 9am to 5pm UK time.

These websites may also be useful:

• Jersey Finance (official representative body)
• The Isle of Man Government website
• The Guernsey Government website
• The UK Inland Revenue
• EUROPA (information on the European Union)