Savings+Tax+Directive+(EU)

=Savings Tax Directive=

Savings tax directive aims to tackle te problem of tax evasion and distortion of the movement of capital. The directive allows effective taxation of interest payments received by individuals in member states other than member state of the residence.

The directive's aim is to create an agreement with EU member states and six non-EU states how to tax interest income earned by foreign investors.

Under the terms of the savings tax directive all the member states are expected to automatically change information on interest payments by paying agents established in their territories to individuals resident in another member state. Savings tax directive covers interest from debt-claims whether obtained directly or as a result of undirect investment.

Process of the savings tax directive
The European comission set up first committee for analyzing savings taxation as early as 1960. But the first Comission proposal was not published before 1967. Another initiative to harmonize savings taxation was published 1989. The next proposal was published in 1998. None of these earlier proposals were effective and member states acted differently to them.

The savings tax directive follows from the presidency conclusions on June 2000 in which member states agreed that all citizens should pay tax due to their savings income. Members also agreed on changing information as wide base as possible. The comission provided guidelines for application of the directive in the proposal for the directive in July 2001.

The savings tax directive was adopted in June 2003 and a year later the council adopted decision establishing the application date on 1st of July 2005.

Twelve member states adopted the automatic system of changing information and Luxembourg, Belgium and Austria adopt a system of levy a withholding tax in different rates. The transitional period suppose to end when Switzerland and other tax haven would adopt automatic change of information or change of information when required

In addition to the Savings tax directive there is agreements with European Comission and Switzerland, Andorra, Liechtenstein, Monaco and San marino which provides measures equivalent to the Savings tax directive which were applied in 2005.

With the member states' dependent territories (such as The channel islands of new jersey and the isle of man and Great Britain's territories in the Caribbean) comission made agreements that the dependent territories provide the same measures as in the directive.

Legal bases of the Savings tax directive

 * Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments.
 * Conclusion of the ECOFIN Council meeting of 26 May 2008,
 * Conclusions unanimously adopted by the Council on 12 April 2005
 * Council Decision 2004/587/EC of 19 July 2004 on the date of application of Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments.
 * Proposal (COM(2001) 400 of 18 July 2001) for a Council Directive to ensure effective taxation of savings income in the form of interest payments within the Community.
 * Conclusions unanimously adopted by the Council on 26 and 27 November 2000 concerning the content of the Directive.
 * [|Presidency Conclusions] of 19 and 20 June 2000

Review of the Savings tax directive
It is written in the Savings tax directive that comission needs to evaluate and report to the council on the operation of the directive in every three years. The comission also needs to propose amandements to the directive which may better ensure effectiveness of the directive.

After the first review 2008 the comission adopted amending proposal targeting in closing existing loopholes in the directive and better preventing tax evasion.

Research made by Thomas Hemmelgarn and Gaetan Nikodeme in 2009 suggested that the loopholes in the directive still existed and the directive had no significant effects on the development of the investments vehicles under it's surveillance. Also research made by Tina Klautke and Alfons Weichtenrieder suggest the the loopholes in the directive allowed tax evasion to continue.

The comission issued it's second review on 2012 and adopted report to the council. In the review comission found out that widespread use of off-shore jurisdictions still existed. This reinforced the arguments that the changes in the first amending proposal should should extend to cover also the agreements not only the directive. The review also revealed that some of the directive's provisions have been interpreted differently in different member states.