Important Information for customers resident in the European Union

The European Union Savings Tax Directive

The European Union Savings Tax Directive (EUSTD) was introduced in 2005 and is an agreement between the EU Member States to automatically exchange information with each other about individuals who earn interest in one EU Member State but reside in another. There were a number of other jurisdictions, such as Switzerland, the Channel Islands and the Isle of Man, which also elected to apply the EUSTD but with a Transition Phase whereby tax could be deducted at source on interest payable to EU residents until such time as Exchange of Information was introduced by the jurisdiction.

Change to the Isle of Man’s current application of the European Union Savings Tax Directive

In 2010, the Isle of Man Government passed legislation to the effect that from 1 July 2011, financial institutions in the Isle of Man will apply automatic Exchange of Information in relation to the EUSTD. This means that the Retention Tax default option will cease to be available from 1 July 2011. From this same date the option to Certify as Exempt from EUSTD will also be removed and all EU residents will be subject to Exchange of Information.

What is Exchange of Information?

Under the application of Exchange of Information in relation to the EUSTD, no tax will be deducted from interest payments made to you. Instead, details of your identity and residence, along with details of the amount of interest paid and the period to which it relates, will be provided to the Isle of Man tax authorities.

The Isle of Man tax authority will in turn provide this information to the EU Member State in which you are resident. This exchange of information does not act as a substitute for your existing duty to disclose your interest payments; you will need to carry on submitting your interest earnings on your tax returns as appropriate.

What does this mean for you?

It depends on which of the 3 options that you have elected to apply to your account with us.

Retention Tax (current Isle of Man default position)

If, as an EU resident, you currently have the 20% retention tax deducted at source on your account with us, then there will be a change for you. Any interest paid to accounts up to and including 30 June 2011 will have retention tax deducted at source and then from 1 July 2011 your interest will be paid gross, ie with no tax deducted. From 1 July 2011, we will no longer deduct tax at source and instead will apply exchange of information to your account. You should continue to submit your interest earnings on your tax returns.

Exchange of Information

If, as an EU resident, you have already elected for us to apply Exchange of Information to your account, then there is no change for you as your interest will continue to be paid gross, ie without the deduction of the retention tax. However, you should be aware that having retention tax deducted at source or providing a certificate of exemption from your tax office will no longer be available as options in relation to the EUSTD. You should, of course, continue to submit your interest earnings on your tax returns.

Certification of Exemption

If, as an EU resident, you have provided us with Certificates of Exemption in relation to the EUSTD, then you should be aware that from 1 July 2011 such Exemptions will cease to be valid. From 1 July 2011, we will instead apply Exchange of Information to your account and your interest will continue to be paid gross, ie with no tax deducted at source.

Please note:

We are unable to provide advice and recommend that you discuss any queries you might have with your tax adviser in the first instance.