Schreiber Associates International

EU Savings Tax Directive

The European Union Savings Directive (Council Directive 2003/48/EC) ('the Directive') was agreed on 3 June 2003.

The so-called European Union withholding tax is a withholding tax which is deducted from interest earned by European Union residents on their investments made in another member state, by the state in which the investment is held. (The European Union has no taxation powers, so the name is strictly a misnomer). The aim of the tax is to ensure that citizens of one member state do not evade taxation by depositing funds outside the jurisdiction of residence and so distort the single market. The tax is withheld at source and passed on to the EU Country of residence. All but three member states disclose the recipient of the interest concerned. (Most EU states already apply a withholding tax to savings and investment income earned by their nationals on deposits and investments in their own states. The Directive seeks to bring inter-state income into the same arrangement, under the Single Market policy).