An expats guide
Richard Colburn
The purpose of the EU Savings Tax Directive is to ensure that interest earned on bank accounts held by EU residents is fully taxed. This is intended to eliminate a common form of tax evasion whereby those living in the European Union avoided tax on their interest income by holding their personal bank accounts in a different member State.
Like most European taxes, the EU saving tax directive is a tax on residency not citizenship so if you are an expat living permanently outside of Europe, you fall outside the scope of this legislation, regardless of the location of your bank account(s).
However if you have not informed your bank that you are living in a place that falls outside of the scope of this law, you may be subject to unnecessary costs and complications. Depending on where your bank account is held, being caught unnecessarily by this law could cost you 15% tax, rising to 35% over the next few years.
It is also worth remembering that a retention tax provision has also been adopted by some European countries and territories that are not themselves EU member states, such as the Isle of Man, Guernsey, Jersey, Switzerland, Liechtenstein and Andorra. The EU savings tax directive is also being applied to the bank accounts of European Union citizens in the more exotic tax haven locations of the British Virgin Islands and the Turks and Caicos Islands.
Many other countries and territories, have arrangements with the Europe Union to exchange information relating to bank accounts.
Check back with us for further developments of these regulations.
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