EU Savings Tax Directive (EUSTD) Frequently Asked Questions

Please note that for EU residents the Bank only opens new accounts on an Exchange of information basis. By completing and agreeing to the new account application form you give your consent to this. Please refer to Section 6.1 and 6.2 of the account application form and the Terms and Conditions relating to the particular account you wish to open.

What is the EU Savings Tax Directive (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.

How the Directive is applied.

Member states can apply the EUSTD in either of 2 ways:

• Exchange of Information: used by the majority of EU member states or
• Retention Tax (also known as Withholding Tax)

What is 'Exchange of Information'?

Exchange of Information means the Bank (Lloyds TSB Offshore Limited and Lloyds TSB Bank (Gibraltar) Limited) will be obliged to exchange information on interest paid to all EU residents. The Bank will forward details of your identity, residence and amount of interest paid to the local tax authority who will forward this information to the tax authority in the EU Country in which you reside. Interest will be paid gross.

What is Retention Tax? (This is also known as Withholding Tax)

This means that Banks automatically deduct 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 Retention (withholding) Tax to the local island tax authority for onward transfer to the tax authority in the EU country where you reside. The present and historical rates of Retention Tax are:

The information contained in this document specifically relates to accounts opened with Lloyds TSB Offshore Limited and/or Lloyds TSB Bank (Gibraltar) Limited and is based on our current understanding of the law which is liable to change. It should not be construed as tax advice. No liability can be accepted for the effect of any subsequent legislation or change of official practice.

Which countries have adopted the EUSTD?

Member States of the EU which apply EUSTD are:–

Non-EU countries that are effectively abiding by the directive are:- Antilles, Isle of Man, Jersey, Guernsey, Gibraltar and the dependent territories of the Caribbean (including Cayman Islands)

Countries that presently apply Retention Tax (also known as Withholding Tax) are:–

How will the legislative changes that came into effect on 1st July 2011 affect the three Island jurisdictions (Isle of Man, Guernsey and Jersey) and Gibraltar?

Isle of Man

From 1st July 2011, Retention (Withholding) Tax and Exempt options will no longer be available.

This means the Bank will be obliged to exchange information on interest paid to all EU residents with an Isle of Man account. The Bank will forward details of the customer’s identity, residence and amount of interest paid to the Isle of Man tax authority who will forward this information to the tax authority in which they reside. Interest will be paid gross with no Retention (Withholding) Tax deducted.

Guernsey

From 1st July 2011, the Retention (Withholding) Tax option will no longer be available.

This means the Bank will be obliged to exchange information on interest payments paid to all EU residents with a Guernsey account. The Bank will forward details of the customer’s identity, residence and amount of interest paid to the Guernsey tax authorities who will forward this information to the tax authority in which they reside. Interest will be paid gross with no Retention (Withholding) Tax deducted.

The exemption option is still available. See below for further information.

Jersey

From 1st July 2011, all three EUSTD options will remain available. The only change to EU residents with a Jersey account is Retention (Withholding) Tax will increase from 20% to 35%.

The Exchange of Information and exempt options are still available.

Gibraltar

There is no change. All EU resident customers who have accounts with our Gibraltar Bank are subject to Exchange of Information in accordance with Gibraltar Ordinance.

What if I am a resident in an EU country but am exempt from EUSTD?

If you are exempt from the EUSTD you will need to supply us with an Exemption Certificate from the tax authority in the EU country where you reside. No other documentation is allowed. Please note that these certificates are only valid for three years and only applicable to the accounts detailed on them.

Can the Bank offer me any tax advice as to what would be best for me?

We are unable to give specific advice regarding your individual circumstances and you may need to contact a Tax Advisor.

I am a non-EU national living in the EU. Does the EUSTD affect me?

Yes. Regardless of your nationality, if you are resident in an EU member state you fall within scope of the Directive if you have savings products in another EU country or the other countries abiding by the EUSTD as listed above.

I am an EU national residing outside the countries that apply the EUSTD. Am I affected by the Directive?

No. As your residential address is outside the countries where the EUSTD is applied you are not affected.

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 a NOR declaration being signed the EUSTD will apply.

Is there a minimum amount that has to be earned before the EUSTD becomes effective?

There is no minimum amount applicable.

Does the EUSTD mean that I have to pay more tax?

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

If your account is held within a jurisdiction where Retention (withholding) Tax is deducted from your income, you may be able to offset this against your tax liability in the EU member state where you reside.

Does the EUSTD just relate to Bank accounts?

No. It also relates to other forms of savings income such as:

• 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 investment 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 (to be reduced to 25% from 2011)

Will my equity linked Offshore Limited Edition Deposit (OLED) be affected by the EUSTD?

Equity linked Offshore Limited Edition Deposit accounts opened in our Jersey, Guernsey and Isle of Man offices are not affected by the Directive.

Equity linked Offshore Limited Edition Deposit accounts opened with Lloyds TSB Bank (Gibraltar) Limited fall within the scope of the Directive.

Do companies or partnerships fall within the scope of the Directive?

No. The Directive only applies to individuals. Legal entities and those entities (including domestic, foreign and limited partnerships) whose profits are taxed under the general arrangements for business taxation are not affected.

Do sole traders come within the scope of the Directive?

Yes. As the Directive applies to individuals, sole traders fall within the scope of the Directive.

How are trusts and trustees affected by the Directive?

• If the trustee is a corporate entity or not resident in an EU member state they are not subject to the Directive.
• 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 or she is resident in Jersey, Guernsey, the Isle of Man or Gibraltar.
• The beneficiary, if resident in an EU member state, being the recipient of savings income arising at trust level will be in scope of the Directive.

Are Personal Representatives or Executors affected by the EUSTD?

Personal Representatives and Executors, in their personal capacity, fall within the scope of the EUSTD if they are resident in an EU member state.

Professional Personal Representatives and Executors e.g. Advocates / Solicitors are out of scope as far as the EUSTD is concerned as they are Paying Agents in their own right and subject to the EUSTD in this capacity.

How will interest be apportioned for joint accounts?

Interest will be apportioned equally between the number of parties to the account. Should the parties to the account be a combination of EU residents and non EU residents only the apportioned interest paid to the EU residents will be subject to the EUSTD.

Can I obtain a certificate detailing the amount of Retention Tax deducted from my account?

Yes. We can supply you with the appropriate certificate upon receipt of your request. Please let us have your request in good time so that it can be prepared and sent to you for inclusion with your tax return.

Where can I find further information?

EUROPA – The official website of the European Union

States of Guernsey: EU Savings Directive

EU Directive on the Taxation of Savings Income – Isle of Man Government

States of Jersey – EUSTD

HM Revenue & Customs: European Union Savings Directive