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Savings directive 2

Exchange of information
Any relevant payee who receives savings income from a paying agent established in another Member State may have details about them collected and verified by that paying agent. The paying agent will then report that information and information about the savings income payment to its own tax authority, who will pass it on to the tax authority of the country or territory in which the individual is resident (according to the Directive rules). This will help tax authorities ensure that the correct amount of tax is paid on the savings income.

Withholding tax
For a transitional period, Austria, Belgium and Luxembourg can withhold tax from savings income payments instead of exchanging information. Some of the other participating countries and territories may also decide to withhold tax initially rather than exchange information. The tax withheld under this system will be in addition to any tax withheld under the territory’s domestic legislation.

However, investors who receive savings income from a paying agent in a withholding country may elect not to have tax withheld or, if withholding tax is charged, they are able to avoid double taxation, as set out below.

Withholding countries enable investors to request that tax is not withheld by implementing at least one of two procedures. For example, individual investors who are tax resident in Ireland will be able to make use of these procedures to receive their overseas savings income without deduction of the withholding tax.

Several Member States have set up two procedures:

  1. The individual may authorise the paying agent to report details of the savings income payment to its tax authority, who will supply it to the tax authority of the individual. The individual will have to follow whatever procedures are prescribed for this purpose by the territory where the paying agent is established.
  2. The individual can ask his/her tax authority for a certificate showing:
  • His name, address, and a tax identification number (or, if he does not have one, his date/place of birth);
  • The name and address of the paying agent;
  • The account number in question or some other means of identifying the security and
  • The period (up to three years) for which the certificate is valid.

In this case, the individual will need to provide information about the paying agent and the source of the savings income tso that the certificate can be drawn up. The individual then presents the completed certificate to the paying agent, and requests them not to withhold tax from the savings income.

Double taxation
In order to make sure that investors are not taxed more than once on the same savings income, investors who have tax withheld under the new scheme rules may claim credit for the tax withheld from their tax authority.

These rules are in addition to the normal rules on double taxation, which will continue to apply in the normal way to any tax withheld in the territory where the original payer of the income is established.

Investors may find that two amounts of foreign tax have been withheld from the gross amount of the savings income:

  • Tax withheld, as now, in the territory where the original payer of the income is resident under that territory’s domestic law; and
  • Tax withheld by a paying agent (known in the legislation as ‘special withholding tax’) as part of the new scheme in those countries and territories that opt to withhold tax rather than exchange information.

Member States should ensure the elimination of any double taxation that may occur as a result of the imposition of withholding tax as follows:

  • As now, any tax withheld in the territory where the original payer of the income is resident under its domestic law will be credited first against the national tax payable on the savings income, provided that credit is allowable under national law or under the national’s DTA with that territory. It will remain the case that such tax cannot be repaid if it exceeds the national tax liability on that income;
  • The special withholding tax will be credited against the remaining national income or capital gains tax liability;
  • Any special withholding tax remaining after the national income and capital gains tax liability will be repaid to the investor by his/her tax authorities.


Member States have included legislation in their tax laws to complete the implementation of the Savings Directive. The legislation:

  • allows the crediting of tax withheld by the paying agent under the new scheme
    prescribe the order of relief where credit is allowable for special withholding tax against an individuals national income or capital gains tax liability.
  • authorises the repayment of any excess special withholding tax credit remaining after exhausting an individuals national income or capital gains tax liability.