This means that as of today, any EU citizen opening an account in the Isle of Man will automatically have his or her account details and information sent to their home tax authority.
Until now, EU citizens with IoM bank accounts had a withholding tax option, meaning that they had a choice between having their details handed over to their home countries, or paying a withholding tax instead, a large part of which was remitted to the country where they lived and paid tax.
Under this system, as an alternative to information disclosure, foreigners with accounts in the Isle of Man could opt to pay a withholding tax at a rate of 15% for the first three years of the EUSD (until 30 June 2008) and 20% for the following three years (until 30 June 2011). Thereafter, until now, the withholding tax has stood at 35%.
The Isle of Man’s parliament approved the plan to move to full automatic exchange of information in June 2010.
‘Designed to flush out evaders’
The EU Savings Directive originally took effect in July 2005, and was designed to flush out tax evaders and make them pay tax to their home country on earnings from savings held in third countries.
However, it quickly emerged that some EU citizens had worked out loopholes that enabled them to continue to avoid paying tax by making use of non-EU jurisdictions, prompting the European Commission to look into ways of stopping this leakage – one of which was to exert pressure on non-EU countries like the Crown Dependencies to sign up to the EUSD.
In a statement yesterday, Isle of Man treasury minister Anne Craine noted that by moving to automatically exchange information with its EU partners, the Isle of Man “has again demonstrated its commitment to being an internationally responsible and co-operative finance centre”.
She also noted that since 2002, the IoM had entered into 24 tax information exchange agreements and four comprehensive double taxation agreements – including three TIEAs within the last two weeks, with Japan, Indonesia and Slovenia.
In the order in which they were signed, the IoM’s four comprehensive double taxation agreements are with Estonia, Belgium, Malta and Bahrain.
