Monday, March 13, 2006

British Virgins Islands and EU Savings Tax Directive

The EU Savings Tax Directive, which went into effect on the 1st of July, 2005, is a part of a European Commission tax reform. Savings Tax Directive introduces information exchange regime to apply across the EU, with all countries agreeing to report interest on savings paid to the citizens of other EU States to those States' tax authorities. As an alternative it is possible to apply a withholding tax (at 15%) instead of information exchange. This alternative is for countries with banking secrecy traditions.

Almost all UK offshore financial centers are also affected by this directive. The British Virgin Islands also falls into this category. It is interesting to know that the EU functionaries have forgotten to include into the initial list the UK dependent territory Bermuda.

As it’s clearly declared on HM Revenue & Customs site, the directive aims to counter cross border tax evasion by collecting and exchanging information about foreign resident individuals receiving savings income outside their resident state. Effective taxation by exchange of information – just as simple as that.

By the way, today is the second Monday in March. It is a public holiday on the BVI - Commonwealth Day.

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