Implications of the introduction of the automatic tax information exchange on the EU Savings Tax Directive

Council of the European Union passed a Directive to abolish the EU Savings Tax Directive 2003/48/EC

The Council of the European Union accepted a Directive to abolish the EU Savings Tax Directive 2003/48/EC on 10 November 2015. The EU Savings Tax Directive was implemented into national law in Germany with the so-called Interest Information Regulation (IIR) and came into force as of 1 July 2005.

Based on the IIR interest payments to natural persons and associations of persons of a non-commercial kind must be reported by the national paying agents. The introduction of this Directive served the Europe-wide combatting of tax evasion and tax avoidance as well as to ensure a consistent taxation of capital gains within the EU. However, it was not possible to achieve these targets owing to numerous possibilities for circumvention. For example distributions and income from foundations do not have to be reported in the Principality of Liechtenstein. The field of application can also be circumvented by means of life insurance wrappers and a management of the capital assets by a joint stock company. The IIR is further not applicable to many capital investment forms and financial products.

The multiple purchase of tax data in a large quantity (“tax CDs”, last purchase of data of the state government of North-Rhine Westphalia in October 2015) remedied information deficits of the German tax authorities.

With the introduction of the automatic tax information exchange (AIA) according to the Common Reporting Standard (CRS) in 2016 respectively 2017 all gaps should be closed.

You can find a current list of the participating states (status 30 October 2015) under:http://www.oecd.org/tax/transparency/AEOI-commitments.pdf

In particular any possibilities for circumvention, e.g. by the use of passive asset structures such as trusts, foundations and domicile companies should be prevented. The reporting obligations and the scope of the income to be reported according to the CRS are covered very broadly compared with the IIR.

The legislative implementation of AIA and CRS has been started already. The German Bundestag passed two draft bills for the regulation of the automatic tax information exchange about financial accounts in tax matters on 12 November 2015. The German Bundesrat now has to vote on these draft bills.

In addition, various multilateral treaties were concluded, e.g. between the EU and Liechtenstein as well as between the EU and Switzerland in order to ensure the automatic tax information exchange in future.

With the introduction of the AIA the EU Savings Tax Directive 2003/48/EC thus becomes superfluous. Consequently a legal basis was now created on EU level for the revocation of this Directive effective as of 1 January 2016 (Austria: 1 January 2017).

Control notifications in Luxembourg – reporting period

2015 In Luxembourg an automatic control notification of interest income of natural persons is carried from 1 January 2015 already. The exercising of the option on anonymous tax deduction in the amount of 35 % is no longer possible according to the EU Savings Tax Directive.

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