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| Index
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| EU Tax
Collectors May Demand 10 Years Of Account Records |
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| If
you value your tax privacy, there are some shocking changes about to take
place in the European Union that we must bring to your attention immediately. |
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| Beginning
July 1, 2005, the “European Savings Tax Directive” will come into effect.
It calls for EU member states to pass details of interest payments to EU
nationals to their respective tax authorities. In order to preserve their
bank secrecy rules, Austria, Belgium and Luxembourg “opted out” of the
information exchange, and will instead impose a withholding tax on interest
payments to EU nationals. In addition, the 10 newest EU members—Cyprus,
Malta, Poland, etc.—will not be subject to these requirements until 2007. |
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| As
the directive is still not in effect, details of exactly how it will operate
are only now coming into view. And there is one “shocker:” tax collecting
authorities in EU countries have been advised that there are no legal barriers
at an EU level to prevent them from requiring banks and other interest-payers
to provide information on interest earnings in previous years. The rumor
in the European banking industry is that this period may extend as far
back as 10 years. |
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| In
late February, I had lunch with a high-level official in the Austrian tax
ministry. He confirmed this position, but added that Austria would not
participate in this effort, as it is one of the three EU countries that
have opted out of the information exchange. |
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| If
you live in one of the EU countries that will be exchanging data pursuant
to the directive, and have at anytime during the past 10 years had a bank
account in another “data exchange” EU country, and did not pay tax on the
interest from this account, you could face a serious problem. If you face
this situation, I recommend that you consult with a tax advisor immediately
to determine your options. |
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| Another consequence
of this directive will be to make it more difficult for EU nationals who
no longer live in the EU to maintain bank accounts there without having
tax deducted or information exchanged. For instance, if you are a U.K.
passport-holder, but no longer live in the United Kingdom, you must prove
that you are tax resident in another country to avoid having tax deducted
or information exchanged. If you live in Dubai or another country that
doesn’t have an income tax, you may not find it easy to obtain a certificate
of tax residence. There may also be problems if you move from one country
to another. In all cases, the default position of the EU financial institution
paying interest to you will be to withhold tax, or to send information
to the country from which you hold a passport. |
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| Incidentally,
overseas territories and dependencies of EU members are subject to the
directive, including Andorra, Aruba, the British Virgin Islands, the Cayman
Islands, Gibraltar, Guernsey, the Isle of Man, Jersey, Monaco, San Marino
and the Turks & Caicos Islands. (Bermuda, however, is exempt.) All
of these overseas territories and dependencies will withhold taxes rather
than participate in information exchange. Several non-EU jurisdictions,
particularly Switzerland and Liechtenstein, will withhold tax as well.
The United States is also enforcing the directive, but the Bush administration
has blocked its implementation. |
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| As
we’ve pointed out before, this directive is easily avoided by banking outside
the EU. Singapore, Hong Kong, Dubai and Panama are all possible alternatives. |
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The
Sovereign Society, headquartered in Waterford, Ireland, was founded in
1998 to provide proven legal strategies for individuals to protect their
wealth and privacy, lower their taxes and to help improve their personal
freedom and liberty.
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The
Society's highly qualified contacts recommend only carefully chosen banks
and investment advisors as well as financial and legal professionals located
in select tax and asset haven jurisdictions around the world. The Society
provides advice concerning the establishement and operation of offshore
bank accounts, asset protection trusts, international business corporations
(IBCs), private foundations, second citizenships and foreign residency,
as well as practical safeguards for financial, Internet and personal privacy.
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Sovereign Society stands alone in fulfilling this singular, international
offshore service role for its members. To learn more about our organization
and how you too can become a member, Click the link below:
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