Savings Directive Review

The European Commission on 13 November 2008 adopted an amending proposal (COM/2008/727 (pdf 179 Kb)(179 Kb) ) to the Savings Taxation Directive, with a view to closing existing loopholes and better preventing tax evasion. The Commission proposal seeks to improve the Directive, so as to better ensure the taxation of interest payments which are channelled through intermediate tax-exempted structures. It is also proposed to extend the scope of the Directive to income equivalent to interest obtained through investments in some innovative financial products as well as in certain life insurance products. See the press release (IP/08/1697 ), the answers to frequently asked questions (MEMO/08/704 ), the technical questions (pdf 34 Kb)(34 Kb), and the Impact Assessment (SEC/2008/2767 (pdf 210 Kb)(210 Kb) ) with its summary (SEC/2008/2768 (pdf 84 Kb)(84 Kb) ). On 28 November 2008, the Commission services updated the tables of statistics (pdf 63 Kb)(63 Kb) which have been supplied by Member States up to that date.

State of play (European Parliament, European Economic and Social Committee, Council)

The European Parliament gave its position (legislative resolution) on 24 April 2009.

The European Economic and Social Committee adopted its opinion on 13 May 2009.

Discussions are still ongoing at Council level , building on unanimous conclusions adopted on 2 December 2008 and on 9 June 2009 . Latest documents can be found on the Council Secretariat's website.

Background

According to Article 18 of Council Directive 2003/48/EC on taxation of income from savings (hereafter the Directive), the Commission is due to report to the Council on the operation of the Directive every three years and to propose any amendments to the Directive that may be required in order better to ensure effective taxation of savings income and to remove any undesirable distortions of competition.

The Commission issued its first report on the subject (COM/2008/552 (pdf 43 Kb)(43 Kb) ) on 15 September 2008. See also the summary presentation (pdf 565 Kb)(565 Kb) and the Commission's working document (SEC/2008/2420 (pdf 90 Kb)(90 Kb)).

With a view to preparing that first report, the Commission services held an informal consultation with the tax administrations and with market operators of the EU Member States in order to examine the operation of the Directive and to get advice on possible amendments to the legislation.

As an interim step towards the first comprehensive report on the operation of the Directive, the Commission services prepared a working document (pdf 152 Kb)(152 Kb)  (SEC/2008/559) with a view to the Council (Ecofin) meeting of the 14th of May 2008. This working document does not carry out an evaluation of the Directive, but only highlights possible refinements to its coverage. See also the relevant summary presentation (pdf 447 Kb)(447 Kb).

The review process takes account of the unanimous agreement reached by the Council on 27 November 2000 (see: excerpt of the Council press release (pdf 175 Kb)(175 Kb)  on the "essential content" of the then "future" Directive).

Consultation of the Member States

Consultation of the Member States on the Directive has so far occurred within two separate working groups: Working Party IV on Direct Taxation and the Working Group on administrative co-operation in the field of direct taxation.

Working Party IV on Direct Taxation

As far back as 14 November 2005, within the framework of the Working Party IV on Direct Taxation (a Commission technical working party), representatives from the tax administrations of Member States had started discussing the possible subjects for the review of the Savings Directive on the basis of a working document (pdf 116 Kb)(116 Kb)  prepared by the Commission's Services ("Questions relating to the interpretation and application of Council Directive 2003/48/EC on taxation of savings income in the form of interest payments"). A more advanced working document (pdf 241 Kb)(241 Kb)  was presented by Commission services to this Working Party on 27 March 2008, following the consultations with market operators (EUSD Group, see below).

Working Group on administrative cooperation in the field of direct taxation

The working group "Administrative Cooperation in the field of Direct Taxation", also comprised of representatives of the Public administrations of Member States, ensures a monitoring of the correct implementation of the Directive concerning exchange of information and transfer of funds according to the revenue sharing of Art. 12 of the Directive.

Consultation with the market operators (EUSD Group)

A group of business experts (Expert Group on Taxation of Savings "EUSD Group" - EUSD = "European Union Savings Directive") has been set up to assist the Commission's Services in their review of the functioning of the Savings Directive as provided in Article 18 of the Savings Directive. For practical reasons, English has been chosen as the only working language of the group, as it is the language currently used in the financial services sector. The EUSD Group met in Brussels on 22nd March 2007 (see the summary record (pdf 141 Kb)(141 Kb) ), on 10th May 2007 (see the summary record (pdf 136 Kb)(136 Kb)), on 13th September 2007 (see the summary record (pdf 145 Kb)(145 Kb) ) and on 19th May 2008 (see the summary record (pdf 159 Kb)(159 Kb)), on the basis of a working document (pdf 277 Kb)(277 Kb)  prepared by the Commission's Services and containing 26 questions to the experts ("Review of the operation of the Council Directive 2003/48/EC on taxation of income from savings"). In parallel with discussions held during the meetings of the EUSD Group, the experts and the Trade Associations concerned have provided written contributions on the questions contained in the working document.

The Commission services have produced a summary document (pdf 322 Kb)(322 Kb) of the written replies from the Trade Associations to the aforementioned working document. This summary document also includes additional oral comments arising in the three meetings held by the Expert Group in 2007.

The Commission has also invited (pdf 121 Kb)(121 Kb) the experts and the Trade Associations concerned by the work of the Group to answer a quantitative questionnaire (pdf 350 Kb)(350 Kb) which was sent to them in its original form on 3rd April 2007; a revised quantitative questionnaire (pdf 124 Kb)(124 Kb)   (pdf 58 Kb)(58 Kb), prepared with the cooperation of the European Banking Federation and taking into account the suggestions of this and other Associations, was sent on 6th July 2007 to the experts and the Trade Associations with a request for specific contributions. The responses received are included in the attached table.

In regard to the working document issued by Commission services on 27 March 2008 for the Working Party IV (see above), the Commission has received a number of contributions from the experts. The responses are included in the attached table. In addition, the European Banking Federation (pdf 74 Kb)(74 Kb) has submitted a contribution related to additional issues which they consider relevant to the Commission's assessment of the operation of the Directive. An additional contribution from the European Fund and Asset Management Association (pdf 44 Kb)(44 Kb) was received regarding the need for a level playing field between financial instruments. Contributions regarding possible changes in the scope of the Directive were received from the Association of Mutual Insurers and Insurance Cooperatives in Europe (pdf 77 Kb)(77 Kb), the Comité Européen des Assurances   (pdf 239 Kb)(239 Kb)   (pdf 328 Kb)(328 Kb), the Association of Life Offices (pdf 540 Kb)(540 Kb)  and the European Federation for Retirement Provision (pdf 30 Kb)(30 Kb).

Two further meetings of the Group have taken place following the adoption of the amending proposal: 3rd March and the 22nd of June 2009. These meetings provided the Commission services with useful information for better assisting the Council in the discussions on the amending Proposal.

Following the adoption of the amending proposal, the Commission services also received written comments on the proposal from experts and Trade associations represented in the EUSD Group. Contributions were received from the Alternative Investment Management Association (document 1 (pdf 42 Kb)(42 Kb)  and 2 (pdf 37 Kb)(37 Kb) ), Comité Européen des Assurances (documents 1 (pdf 249 Kb)(249 Kb)  and 2 (pdf 253 Kb)(253 Kb) ), the European Banking Federation (document 1 (pdf 59 Kb)(59 Kb) ) , the European Forum of Securities Associations e-mail of 23/12/2008 (pdf 96 Kb)(96 Kb)  and its annex (pdf 109 Kb)(109 Kb)  and letter of 13/10/2008 (pdf 115 Kb)(115 Kb)  , the Association of Life Offices letter of 27/03/2009 (pdf 799 Kb)(799 Kb)  and its four annexes (1 (pdf 425 Kb)(425 Kb) , 2 (pdf 1.79 Mb)(1.79 Mb) , 3 (pdf 1.08 Mb)(1.08 Mb) , 4 (pdf 430 Kb)(430 Kb) ), the letter of 16/04/2009 (pdf 1.14 Mb)(1.14 Mb) , and the letter of 03/07/2009 (pdf 495 Kb)(495 Kb)  and the European Fund and Asset Management Association (document 1 (pdf 96 Kb)(96 Kb) ).

What are the tasks of the EUSD Group?

The objective of the group (EUSD = "European Union Savings Directive") is to provide the Commission with the viewpoint of the European Union market operators on the application of the Directive in Member States and, at the same time, facilitate a first scrutiny of the possible impact on markets of any amendments to the Directive which could come up for consideration as a result of the review process.

The Group is examining, among others, issues of the following nature:

• Possible reference to the actual beneficial owner in case of payments channelled through intermediate vehicles, and more accurate rules for verifying the current residence of the beneficial owner for the purposes of the Directive;
• Application of the Directive in the case of interest payments made to trusts or to entities, having legal personality or not, which are transparent for tax purposes;
• Clearer definition of the interest payments covered by the Directive to ensure equal treatment between income from debt claims and income from some other financial products which are considered comparable to debt claims by the investors;
• Fine tuning of the definition of investment funds in order to ensure a level playing field for investment funds under the Directive.

The Group's original mandate was until 31 December 2008. The Commission has decided to extend the mandate of the expert Group until 31 December 2010.

In 2009 and 2010 the mandate of the Expert Group had been extended to include the following issues:

• Ensuring that both the amending directive, when adopted, and the domestic implementing rules will be faithful to the Commission's aim to limit the administrative burden on market operators.
• Assisting the Commission in the task of establishing the collection of appropriate statistics from market operators, with a view to allow a more accurate cost benefit analysis at the occasion of the next review of the directive in 2011.

The mandate of the Expert Group has subsequently been extended to 30.06.2012. In 2011 and 2012, the expert Group will provide assistance to the Commission in the second review of the Directive, in which the following studies are foreseen:

• Evaluation to provide advice on detecting the start-up and recurrent cost of implementation of the Savings Taxation Directive for the different categories of market operators already or potentially involved.
• Evaluation to provide advice on the substitution effect between comparable retail savings products depending on the coverage of the products concerned by the scope of the Savings Taxation Directive;

 Who is taking part in the EUSD Group?

The EUSD Group consists of tax experts from banking, insurance, investment funds, asset management and related sectors of the European Union (composition of the group: members and their alternates (pdf 89 Kb)(89 Kb)) and and a short description of each Trade association (pdf 82 Kb)(82 Kb) .

How can I get involved in the review process?

Contributions from any interested party are welcome. Please send them to taxud-savingsdirective_review@ec.europa.eu