Since the 1st July 2005, the European Savings Tax Directive comes into force after almost 20 years of negotiations. This new legislation is aimed to establish an exchange information system between the different tax authorities from a total of 40 countries or territories. This measure affects the savings income in the form of bank interests, within the scope of the European Union. Consequently, interests paid from that date in a Member State to a physical person residing in another EU country will be subject to tax, according to the fiscal legislation of the country in which the individual is residing. To this purpose, the above mentioned Directive decided to establish an information interchange system between tax authorities of the Member States. Belgium, Luxembourg and Austria are exceptions as they have opted to withhold taxes on paid incomes.

When the beneficial owner is residing in a Member State other than in which the paying agent is established, the directive stipulates that the latter must report to the competent authority of the Member State where he or she is established, a minimum amount of information, such as the identity and residence of the beneficial owner, the name or denomination and address of the paying agent, the account number of the beneficial owner, or where there is none, the identification of the debt claim giving rise to the interest and the information concerning the interest payment.

However, the loopholes in this new regulation will not allow us to completely eradicate fraud, because it is only applied to natural persons who are residents for tax purposes in another Member State and it is focused on taxation on savings income in the form of interest payments on debt claims and it excludes all issues related to the taxation of pensions and insurance benefits.

This is the reason why we are afraid that this new measure forces the small savers like retired Nordics residing in Spain, to declare, instead of achieving a greater control on the big investors who use financial products which escape from this Directive.

In order to not to leave the 25 Member States defenceless against the capital flight to other surrounding countries and territories, during the last years the EU has been negotiating with Switzerland, Liechtenstein, Monaco, Andorra and San Marino plus ten dependent or associated territories (Cayman Islands, Jersey, the Netherlands Antilles, Montserrat, Aruba, Anguilla, Virgin Islands, Guernsey, Le Man Island, and the Turks and Caicos islands), who will finally apply equivalent methods related to savings income.

Member States will interchange information about the interests their residents are receiving, except for Austria, Belgium and Luxembourg, who will have a transitional period during which they will apply a withholding tax.