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Savings Directive Implementation

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Under the Directive on taxation of savings, information will be collected about the payment of savings income to residents in certain other countries and exchanged automatically with tax authorities in those countries. Member States´s regulations should set out the detailed rules for the national scheme implementing the Directive.

To implement the Directive, Member States developed schemes to collect information about the payment of savings income to certain overseas residents, and to exchange this with certain other countries.

The schemes mainly affects banks, registrars, custodians and other financial institutions that make interest payments to individuals in prescribed territories. But it may also affect market operators who purchase money debts from individuals in prescribed territories or redeem money debts held by individuals in prescribed territories. It will also be relevant to those who hold or administer money debts on behalf of others and those who advise paying agents (such as accountants, tax advisers or solicitors).

The Savings Directive requires a Member State to automatically forward to the competent authorities of other EU Member States information on payments of savings income by its paying agents to residents of the other Member States.

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

  • 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 Income or Capital Gains tax liability.
  • authorises the repayment of any excess special withholding tax credit remaining after exhausting an individuals  Income or Capital Gains tax liability.

Reporting of sales/redemption proceeds

There are changes affecting the reporting of sales/redemption proceeds in relation to United Kingdom authorised investment funds as a result of the revision of the assets test from 40% to 25% effective from 1 January 2011.

Grandfathering period
End of the grandfathering period at 31 December 2010 for certain types of bonds.

Transitional Arrangements

Belgium cease to be within the transitional arrangements from 1 January 2010. Austria and Luxembourg from 1 January 2011.

Gibraltar

Gibraltar, as part of the UK for the purposes of this type of EU Directive, is required to do so on payments of savings income by Gibraltar paying agents to residents of the other Member States. However, as Gibraltar and the UK are not separate EU Member States, the EU Savings Directive provides no legal basis for application of the relevant measures to payments of savings income passing between Gibraltar and the UK. The UK therefore signed a bilateral Savings Tax Information Exchange Agreement with Gibraltar on 19 December 2005 to apply the same measures as provided for by the Directive to payments of income passing between our two jurisdictions. Under the terms of this agreement, the UK will automatically provide information to the Gibraltar Government on savings income payments by UK paying agents to Gibraltar residents. Gibraltar paying agents will apply withholding tax to savings income paid to UK residents during the transitional period, as provided for in the Directive, and the Government of Gibraltar will pass 75% of the tax withheld to HM Revenue and Customs.
This agreement came into force on 1 April 2006, but paying agents should report payments made to individuals or residual entities in Gibraltar from 1 July 2005, as for any other prescribed territory.
UK regulations included Gibraltar as a prescribed territory from 1 July 2005 for these reporting requirements in anticipation of concluding a bilateral agreement with Gibraltar, so as to avoid the need to amend legislation and paying agent operating systems mid-year to take account of this agreement.