What is the European Union Tax on Savings Tax Directive (EUSD)?
The EUSD is an agreement between the Member States of the European Union (EU) to automatically exchange information with each other about customers who earn savings income in one EU Member State but reside in another (the automatic exchange of information option). Whilst automatic exchange of information is the ultimate objective of the EUSD, three EU Member States (Austria, Belgium and Luxembourg) have opted to apply alternative arrangements during a transitional period. Under these arrangements, tax will be deducted at source from income earned by EU resident individuals on savings held in other EU countries (the withholding tax option), initially this will be at a rate of 15%.
Why is it that banks in the Isle of Man are complying with an EU Directive, when the Isle of Man is not part of the EU?
Although the Isle of Man is not part of the EU, it has voluntarily agreed (along with Jersey, Guernsey, Switzerland and a number of other non-EU jurisdictions) to apply similar provisions. The Isle of Man and Channel Islands have decided to follow the same withholding tax option as adopted by Austria, Belgium and Luxembourg.
In the Isle of Man, Jersey and Guernsey the withholding tax option is known as the "retention tax option".
When is the EUSD effective from?
The EUSD came into force on 1 July 2005.
Will it affect me?
If you are an individual resident in an EU Member State (e.g. the UK or Spain) and you earn bank interest on an account held with a Zurich Bank International, then you will be affected by the EUSD.
If you are resident outside the EU but hold a passport issued by an EU Member State then you should fall outside the scope of the EUSD. However, you will be requested to provide proof that you are resident outside the EU.
How will it affect me?
If you are affected by these rules then interest payments made to you by Zurich Bank International after 1 July 2005 will be paid net of 15% retention tax, unless you opt for the exchange of information option (see below). This rate of retention tax is due to increase to 20% from 1 July 2008 and 35% from 1 July 2011.
If you elect for exchange of information then no tax will be deducted from interest payments made to you.
How do I elect for exchange of information?
If you choose exchange of information then no retention tax will be deducted from interest payments made to you. Instead, details of your identity and residence, along with details of the level of interest received and the period to which it relates will be provided to the Isle of Man Tax Authorities. The Isle of Man Tax Authorities will then in turn provide this information to the EU Member State in which you are resident.
Should you elect for exchange of information please indicate so when completing the account opening form or notify us separately in writing.
Will these changes mean that I should pay more tax?
No. On the basis that you are already declaring the interest income to your home tax authorities these changes will have no impact upon the overall level of tax that you pay. If interest payments to you are made net of the 15% retention tax then this tax will be available for credit (offset) against your tax liability in the EU Member State in which you are resident.
How do these changes affect customer confidentiality rules?
These changes will have no impact upon customer confidentiality unless you elect for exchange of information. If you elect for exchange of information then relevant details regarding the account and the interest payment will be provided to the Isle of Man tax authorities who in turn will provide that information to the tax authorities of the EU Member State in which you are resident.
If you do not elect for the exchange of information option then no information regarding you or your Zurich Bank International bank account will be provided to either the Isle of Man tax authorities or the tax authorities of the EU Member State in which you are resident.
How can I find out more?
If you have any questions about this letter or how the EUSD may affect you, please contact our Relationship Banking Team on +44 (0)1624 671666. Further guidance on the EUSD can also be found at www.isleofmanfinance.com
Please note that Zurich Bank International is unable to provide specific individual tax advice, and you should consult your financial/tax advisor for this purpose.
EU Member States:
Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, United Kingdom.
Other Territories:
Andorra, Anguilla, Aruba, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Liechtenstein, Monaco, Montserrat, Netherlands Antilles, San Marino, Switzerland, Turks & Caicos.
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