15 November 2013

ECOFIN Council results: Savings taxation

The Council discussed a draft directive aimed at strengthening EU rules on the taxation of savings income.

Draft amendments to directive 2003/48/EC are intended to prevent the directive's circumvention, reflecting changes to savings products and developments in investor behaviour since it came into force in 2005.

The aim is to enlarge the directive's scope to include all types of savings income and products that generate interest or equivalent income. And using a "look-through" approach, reasonable steps would be required of tax authorities to establish the identity of beneficial owners.

The Council's discussion confirmed broad support for the amended directive. The dossier will be again discussed in the near future, with a view to reaching an agreement. The presidency expected that this could be done before the end of the year, within the deadline set by the European Council.

Directive 2003/48/EC requires the Member States to exchange information automatically so as to enable interest payments made in one country to residents of other to be taxed in accordance with the laws of the state of tax residence. During a transitional period, Luxembourg and Austria can impose a withholding tax on interest paid to savers resident in other Member States, instead of providing information on savers.

Based on article 115 of the Treaty on the Functioning of the European Union, the directive requires unanimity for adoption by the Council, after consulting the European Parliament.

Under agreements with the EU signed in 2004, Switzerland, Liechtenstein, Monaco, Andorra and San Marino apply measures equivalent to those provided for in the directive. Guernsey, Jersey, the Isle of Man and seven Caribbean territories do likewise, under bilateral agreements concluded with each of the Member States.

Equivalent measures in those agreements involve either automatic exchange of information or a withholding tax on interest paid to savers resident in the EU. A proportion of the revenue accrued from the withholding tax is transferred to the country of the saver's tax residence.

In May, the Council mandated the Commission to negotiate updated agreements with Switzerland, Liechtenstein, Monaco, Andorra and San Marino to reflect the changes to the EU Directive.

Full Council results

Lithuanian Presidency

“We had a good political discussion today. The purpose of the Directive is to ensure the fair paying of taxes and to help fight against tax fraud and tax evasion, which is a global concern. The Lithuanian Presidency looks forward to reach the agreement on this question before the end of this year. Such expectation was also expressed by the European Council", said Minister Šadžius.

Press release

Commissioner Šemeta said the challenge was to ensure a solid EU legislative framework that would also be part of the legal basis for Member States in applying the new global standard of automatic exchange, which will become operational in 2016.

(...)

All States acknowledge the new reality of automatic exchange of information and the importance having accurate and complete information on real beneficial owners. And all acknowledge that the scope of the information to be exchanged cannot be as narrowly defined as it is today. In fact, where formal negotiations have started, we see a willingness to examine an even wider scope than that of the Savings text before you today.

More generally, it is clear that the era of banking secrecy is coming to an end. Countries such as Switzerland, Liechtenstein and Singapore have committed to FATCA agreements with the US. And Switzerland has signed the OECD multilateral convention on administrative assistance. Therefore, the backdrop to our discussions today is more favourable than it has ever been.

To Luxembourg and Austria in particular, I say – you need to recognise the changes that have occurred since you first spoke of a level playing field. In particular, the EU is no longer making the first move. The world is already moving. And the EU must not be left behind.

It is time to adopt the revised Savings Directive. It is time to send a clear signal to our market operators and negotiating partners. It is time for a show of unity in building a new and coherent EU legal framework within which our Member States can operate.

Full speech

© European Council