EU To Extend Automatic Exchange of Information
June 2013

The amount of financial information to be shared between EU countries will significantly increase over the next years. As part of its intensified fight against tax evasion, the European Commission has proposed extending the automatic exchange of information between EU tax administrations, so that the EU will have the most comprehensive system in the world.

There are already plans to extend the EU’s Savings Tax Directive, and on 12th June 2013 the Commission announced its plans to include dividends, capital gains and other forms of financial income and account balances to the list of categories to be subject to automatic exchange of information.
The EU has two Directives which provide for automatic information sharing, both of which will be extended.

Savings Tax Directive
The Savings Tax Directive came into effect in 2005. It ensures that Member States collect data on the savings income of EU residents and automatically forward it to the tax authority of the individual’s country of residence.

“Savings income” covers interest from cash deposits and debt claims of every kind, such as corporate and government bonds.
In May the European Council committed to adopting a revised Savings Tax Directive by the end of this year. It will close the loopholes, so that the above income will also be exchanged on an automatic basis within the EU.

Austria and Luxembourg currently do not automatically exchange information and therefore, if you do not opt for exchange of information, these countries will instead deduct a withholding tax. However they have now committed to fall into line with the rest of the EU despite previous reluctance. 

The EU has started discussions with Switzerland, Andorra, Liechtenstein, Monaco and San Marino on automatic exchange of bank data.  Although signatories to the Directive, they currently apply the withholding tax so that banking secrecy can be maintained.

Administrative Cooperation Directive
The Administrative Cooperation Directive will apply automatic exchange of information to other forms of income, with effect from January 2015.

Until now it covered income from employment, director’s fees, life insurance, pensions and property. All “available” information is to be reported.
Under the latest proposal, the list will include dividends, capital gains and other financial income and account balances.

This will also apply from January 2015. In these cases, exchange of information will be mandatory as Member States will already be making it available to the US under its Foreign Account Tax Compliance Act (FATCA).
The European Commission actually claims that its new requirements go further than FATCA.
It plans to introduce a bill to make exchange of information more efficient and less fragmented.
In April the G5 countries of the UK, Spain, France, Germany and Italy agreed to develop and pilot an automatic exchange of information system, along the same lines as FATCA. According to the Commission, 12 other Member States have indicated they will sign up.

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