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Taxation of savings income
The European Union (EU) intends to enable interest on savings received in one Member State by individuals who are resident for tax purposes in another Member State to be made subject to effective taxation in accordance with the laws of the latter Member State.
Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments.
The aim of the Directive is to enable savings income, in the form of interest payments made in one Member State to "beneficial owners" * who are individual residents for tax purposes in another Member State, to be made subject to effective taxation in accordance with the laws of the latter Member State. The automatic exchange of information between Member States concerning interest payments * is the means chosen to achieve effective taxation of these "interest payments" in the Member State where the beneficial owner is resident for tax purposes. Member States must therefore take the necessary measures to ensure that the tasks necessary for the implementation of this Directive - cooperation and exchange of banking information - are carried out by paying agents established within their territory, irrespective of the place of establishment of the debtor of the debt claim producing the interest.
The scope of this Directive is limited to taxation of savings income in the form of interest payments on debt claims, to the exclusion of the issues relating to the taxation of pension and insurance benefits. At territorial level, the Directive applies to interest paid by a "paying agent" * established within the territory to which the Treaty applies.
The general system: exchange of information
- Information reporting by the paying agent
Where the beneficial owner is resident in a Member State other than that in which the paying agent is established, the Directive stipulates that the latter must report to the competent authority of its Member State of establishment a minimum amount of information, such as the identity and residence of the beneficial owner, the name and address of the paying agent, the account number of the beneficial owner or, where there is none, identification of the debt claim giving rise to the interest, and information concerning the interest payment.
Moreover, the minimum amount of information concerning interest payment to be reported by the paying agent must distinguish between the specific categories of interest listed in the Directive. However, Member States may restrict the minimum amount of information to the total amount of interest or income and to the total amount of the proceeds from sale, redemption or refund.
- Automatic exchange of information
Under the Directive, the competent authority of the Member State of the paying agent must communicate - at least once a year, within six months following the end of the tax year of the Member State of the paying agent - the information referred to above to the competent authority of the Member State of residence of the beneficial owner.
As part of the "tax package" aimed at combating harmful tax competition, the European Union (EU) decided to draw up a legislative instrument to overcome existing distortions in the effective taxation of savings income in the form of interest payments.
This Directive builds on the consensus reached at the Feira European Council of 19 and 20 June 2000. During this Council, it was decided to set up of an automatic exchange of information system between all Member States. Belgium, Luxembourg and Austria benefited from a transitional period for the implementation of this measure during which, instead of providing information to the other Member States, they had to apply a withholding tax to the savings income covered by this Directive.
|Key terms used in the act|
|Act||Entry into force||Deadline for transposition in the Member States||Official Journal|
Date of application: 1.7.2005
OJ L 157 of 26.6.2003
The successive amendments and corrections to Directive 2003/48/EC have been integrated into the original text. This consolidated version is for reference only.