|
|
|
|
 |
|
The European Union Savings Tax Directive
29/01/2004 @ 09:59
The end of banking secrecy
On January 21st, after several years of wrangling back and forth the EU Finance Ministers finally reached an agreement to end tax evasion. The new Directive will be passed into the legislation of all Member States by 2004 and will effectively come into force by 2005.
It is estimated that more than 60% of the world’s wealth is being held offshore and the percentage is rising. The result of the new agreement is increasing danger for any EU citizen not declaring their full income or assets for tax purposes.
The governments of the EU have for more than ten years been trying to get their hands on some of the interest that their citizens earn on undeclared savings. The amounts being held in offshore accounts by German citizens alone are estimated to be more than USD 300 billion thus the potential tax income for the governments can be considerable.
The deal was possible when Britain dropped its insistence that Luxembourg, Austria and Belgium should also exchange information as a matter of course.
From January 1st 2005 twelve of the EU’s member states will automatically exchange information on the billions of Euros that their citizens hide abroad so that they can be taxed in the savers home countries. Luxembourg, Austria and Belgium will not exchange information initially but instead impose a withholding tax. The rate will start at 15% from 2005, rise to 20% in 2007 and then in 2010 rise further to 35%. The proceeds will go to the tax authority of the country of residence of the individual saver.
Switzerland, although being outside the EU, has also agreed to impose a withholding tax on the same terms but not to automatically exchange information. Switzerland will exchange information on request for all criminal or civil fraud cases of tax fraud. Other countries included in the agreement are the Channel Islands and the UK Caribbean dependencies, which also holds considerable amounts of EU citizens’ savings.
In addition to the above existing agreements with the USA already allows for information to be exchanged in cases of suspected tax evasion. The EU will also continue their negotiations with other non-EU countries in order to struck similar deals. It is assumed that Monaco, Andorra, San Marino and Liechtenstein will have to fall in line as well.
It is important to note that the above measures are aimed at non-resident bank accounts, thus it do not cover insurance companies or mutual fund companies. This in itself opens up a number of possibilities for careful tax planning for those who do not wish their savings to be affected by the new laws.
The new word in international tax planning is “onshorisation” which means using fully legitimate tax planning structures in order to avoid or minimize taxes.
If you want to find out how to avoid, in a completely legitimate way, to pay up to 35% in tax please contact one of our offices for further information.
Short facts:
- The deadline for completion of the negotiations is during the summer of 2004. If they are not completed by then it is almost certain the implementation will be delayed otherwise the directive will be in force as of Januari 1st 2005.
- The EU member states will automatically exchange information regarding non-resident bank accounts within the EU. The new directive will be in effect from the 1st of January 2005 and applies to all EU member countries with the exception of Luxembourg, Austria and Belgium who will instead impose a withholding tax of 15%, which will be increased in steps up to 35%.
- The EU member states will automatically exchange information regarding non-resident bank accounts within the EU.
- The new directive will be in effect from the 1st of January 2004 and applies to all EU member countries with the exception of Luxembourg, Austria and Belgium who will instead impose a withholding tax of 15%, which will be increased in steps up to 35%.
- It also applies to offshore territories such as the Channel Islands, The Netherland Antilles and the UK Caribbean dependencies. These jurisdictions have up to the 1st of January to decide if they wish to automatically exchange information or to impose a withholding tax.
- Switzerland will also impose a withholding tax of 15%, which will be increased to up to 35%.
- From 2011 all EU member states including Switzerland will automatically exchange information.
- Cyprus banks will have to automatically exchange information accordingly from the date of entry into the EU
- The above applies to non-resident savings accounts.
- Excluded is: insurance based investments and collective investments (mutual funds)
- Practically, when opening a Non-resident account, the bank will request from the account holder to show proof of country of residence including a tax reference number.
|
| |
|
|
|
Downloads
Contact Us
Contact
Consulco
Call
Me Back
Find
People at Consulco
Sign up for our newsletter