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EU Savings Tax Directive

Under the Savings Tax Directive banks in offshore tax havens will be required either to tell tax authorities about interest they pay to individual EU residents, or to withhold an agreed amount of tax from interest paid. Whilst in principle a tax payer could choose to opt for communication rather than withholding, in practice it seems that institutions or countries are making the decision.

The Directive has now come into force.

Most EU members, including new joiners, have agreed to exchange information but Austria, Belgium, Luxembourg will instead apply a withholding tax at 20% since 1 July 2008 and 35% from 1 July 2011.

As well as EU members, the regime apparently also applies to savings held in Switzerland, Monaco, Liechenstein, San Marino, Monaco and Andorra as well as dependant territories such as the Channel Islands (including Jersey, Guernsey and Alderney), Isle of Man, and those in the Caribbean, but not other tax havens in Asia etc until bilateral arrangements are made.

Here are some resources that may prove helpful:

EU introduction to the directive
Inland Revenue notes on issues affecting UK savers. This page explains how a UK resident can obtain forms from the Revenue that can prevent tax from being withheld.
IOM response to the Directive (see esp para 9)
Jersey Guide to the European Savings Tax Directive. An easily understood guide. Jersey is offering savers the choice of disclosure or withholding (retention) tax (see para 7).
Summary from Ernst and Young showing how each EU member is treating the directive.