What is the objective of this European Union savings tax directive?
Currently, it is difficult for EU member states to collect taxes on the income earned by their residents from savings and other investment instruments in another member state. The EU savings tax directive (Council Directive 2003/48/EC) is therefore aimed at enabling savings income in the form of interest payments made in one member state to individuals resident in another member state, subject to taxation. This includes interest payments made in European offshore jurisdictions and dependent territories such as Anguilla, British Virgin Islands, Cayman Islands, St Maarten, and Turks & Caicos. There are 2 options under the directive. 1. Withholding Tax – Tax on any income paid on savings, fixed deposit, and interest bearing chequing accounts will be withheld from the account and forwarded to the competent authority in the account holder’s country of residence. The tax will be levied at a rate of 15% during the first three years, 20% for the subsequent three years, and 35% thereafter. OR 2
