.png)
.png)
The EC has adopted an amending proposal to the Savings Taxation Directive, with a view to closing existing loopholes and eliminating tax evasion.
Since 2005, the directive has ensured that paying agents either report interest income received by taxpayers resident in other EU member states or levy a withholding tax on the interest income received.
The idea is to improve the directive, so that interest payments which are channelled through intermediate tax-exempted structures do not escape tax.
The directive is also to be extended to income equivalent to interest obtained through investments in some innovative financial products as well as in certain life insurances products. In addition, it is to be made easier to implement.
The review of the directive has shown that, at present, it is relatively easy for individuals to circumvent the rules by using interposed legal persons or arrangements (like certain foundations or trusts) that are not taxed on their income.
With regard to interest payments made by paying agents established in the EU to certain intermediate structures established outside the EU, the commission proposes that these paying agents apply the provisions of the directive at the time of the payment to the intermediate structure, as if this payment was directly made to the individual.
Concerning payments of interest to certain intermediate structures established within the EU, including some non-charitable trusts and foundations, those structures will be always obliged to act as a 'paying agent upon receipt'.
This means that the provisions of the directive must be applied by these structures upon receipt of any interest payment from any upstream economic operator.
The suggested definition of paying agent upon receipt includes all entities and legal arrangements which are not taxed on their income under the general rules for direct taxation in their member state of residence/establishment.
The directive can also be circumvented by using innovative financial vehicles instead of a savings account in a bank. Therefore, the commission proposes extending the scope of the directive to income from:
- securities which are equivalent to debt claims (of which the capital is protected and the return on investment is pre-defined);
- life insurance contracts whose performance is strictly linked to income from debt claims or equivalent income and have less than 5% risk coverage.
In addition, the commission proposal wants to provide a level playing field between all investment funds or schemes, independently of their legal form. This means that income obtained from those investment funds by individuals resident in the EU will be subject to effective taxation.
