The Commission has presented to the Council of Ministers a new
proposal for a Directive to ensure minimum effective taxation of
savings income within the EU. The proposal aims to tackle
distortions within the single market arising from non-taxation of
cross-border interest payments to individuals.
A 'withholding tax' of at least 20% would apply to
interest payments in one EU country made to individuals resident in
another EU country. In accordance with the "co-existence model"
each Member State will have the choice between levying a
withholding tax on the relevant income or alternatively providing
information on that income to the competent tax authorities in the
other Member State which could then levy the appropriate taxes. The
Member State in which interest is paid must choose between the two
Depending on which option is selected, the
individual who places his savings in another
Member State would either know that the tax
authorities in his home state would be informed about the interest
received or he would receive the payment of interest reduced by the
withholding tax. Alternatively, the individual could choose to
personally inform his home state about the interest on his savings
in another Member State. He could then apply for a certificate
attesting to this from his tax authorities and the institution
paying the interest would not withhold tax on the interest if
provided with the certificate.
Not all types of interest income are included in
this harmonisation measure. The proposal covers only taxation of
cross-border savings income in the form of interest paid in one
Member State to individuals who are resident in other Member
States. The Directive would not cover, for example, interest income
paid to residents of third countries. Implementation of the
proposed measures would rely on co-operation of the paying agents,
normally banks, who would be obliged either to provide information
on the interest payments or to pay out the interest.