|
What is
the EU Savings Tax Directive?
The EU
Savings Tax Directive was introduced in July 2005, and for
the first time it forced each EU member country to exchange
information about EU residents living in one country who
earn interest on bank accounts (and a few other types of
investments) held in another EU country. It only applies to
EU residents, so if you’re not
resident in the EU, you will not be affected by this tax,
provided your bank knows this.
Gibraltar,
the Cayman Islands and the Antilles although not EU members
have also introduced legislation which backs the aims of the
Directive, and will provide information on accounts of EU
residents to the relevant EU tax authority.
However
Austria, Belgium and Luxemburg have for the time being opted
out of this system, and introduced a “withholding tax”,
deducting tax at source at a current rate of 15%. This rate
will increase to 35% in 2011.
Some other
countries and offshore centres, although not within the EU
have also adopted rules which support this Directive, such
as Switzerland, Jersey, Guernsey and the Isle of Man. If you
hold an account in any of these jurisdictions you have two
options:
Opt for tax
to be deducted at source at a rate of 15%, which is called a
“retention tax” in these states, but is just the same as the
“withholding tax”. Most banks in these places have opted for
this as the default option, i.e. if you don’t do anything
they will take tax from the interest.
Opt for the
exchange of information, in which case the interest will be
paid in full, but details of the account and interest will
ultimately end up in the hands of the tax authorities in the
EU country in which you are resident. With most banks you will
normally have to explicitly tell them this is your favoured
option if you want the interest paid in full.
There are a
number of other jurisdictions which have also adopted
similar rules which generally go some way to support the
aims of the Directive they are:
Andorra,
Anguilla, Aruba, British Virgin Islands, Guernsey, ,
Liechtenstein, Monaco, Montserrat, Netherlands Antilles, San
Marino, Turks & Caicos
Is it
possible to avoid the EU Savings Tax Directive?
The short answer is that there are some perfectly legal ways
to get around the retention tax, or the disclosure of
information.
Avoiding
the European Union Savings Tax Directive.
There are a number of minor international
offshore centres which have elected not to support the
Directive these include,
Singapore,
Hong Kong,
Bermuda and
Barbados. If you feel comfortable
putting your money in these centres and the rate of interest
is adequate, then you could consider this as an option.
For people
who want to use the companies located in some one of the most
secure and highly regulated offshore centres, such as
Jersey, Guernsey or the Isle of Man then it is still
possible to avoid the EUSTD.
It is
possible to use an offshore insurance bond (also known as
portfolio bonds) to avoid the implications of the directive.
These types of investments are offered by a number of
offshore insurance companies and investments held within
this type of contract do not form part of the directive.
Once you
have an insurance bond there are two ways in which you can
invest in deposit/bank accounts. You can either select a
“cash fund” which will invest the money in a wide range of
bank accounts/money market investments. Or you can use the
insurance bond as a wrapper. Using the insurance bond as a
wrapper means that you would have an insurance bond with one
company, and sitting within the bond is an offshore bank
account with another company. You can therefore shop around
for the best interest rate for you.
The
advantage of using a bond this way is that the money avoids
the Directive, and the interest is untaxed, and totally
confidential.
If you want
to know more about European Savings Tax Directive and how to
avoid it then contact CLR Overseas, free and without obligation on +357 22 898684 or
contact
CLR online.
|
