The EU Savings Tax Directive that came into force in 2005 in a bid to clampdown on cross border tax evasion within the EU and between other named countries has again come under the spotlight, and changes to the EU Savings Tax Directive have been aggressively proposed by the Germans.
The Directive forces financial institutions to disclose certain key information about certain types of account holder and/or withhold tax from such individuals’ accounts, but the German government are not satisfied that the Directive goes far enough in cracking down on tax evasion and are pushing or a complete overhaul of the legislation.
The Germans estimate that they still lose an average of EUR 30 billion annually in tax fraud and are therefore extremely keen to get the scope of the Directive expanded. Currently only individuals rather than entities such as trusts, companies, foundations or other types of investment vehicle such as tax wrappers come within the remit of the directive. This has allowed those who wish their privacy be maintained to restructure their assets in such a way that they avoid having their personal data reported to their home tax authority. The Germans believe this has also allowed some less than scrupulous individuals to restructure their finances to avoid taxation.
The German government has been instrumental in forcing the EU tax commissioner, Laszlo Kovacs to consider expanding the remit of the EU Savings Tax Directive. Kovacs has said that he will consider expanding the scope of the Directive accordingly, and therefore anyone residing in one EU country but with assets or accounts in another should speak to their financial adviser to ensure that they are abiding by the proper tax rules for their country. If you are in any doubt you are best advised to speak to an international financial adviser who understands cross border tax rules.
Just as a final note on this topic – the original EU Savings Tax Directive took about 14 years to come into effect because there was so much opposition to it…so whilst new changes have been proposed, it may be some time before they come into effect. Anyway, as stated, if you are in any doubt about the legal state of your financial affairs, don’t leave it to chance, speak to a qualified adviser.