| Area affected | Surprise | Comments |
| 1. | Untaxed entities owned by trusts / foundations | If the management of the entity is located within the savings tax territory, it is in scope. I.e. a Hong Kong Company owned by a Liechtenstein foundation. The Vaduz based council becomes the Paying Agent Upon Receipt. As such, irrespective of where the bank account is held, the council must identify the beneficial owner of the entity, which is the same as the beneficial owner of the foundation., viz the principal founder, else the council becomes a Paying Agent Upon Distribution. | If management of entity is located outside the territory, the bank must attempt to look through the structure at the beneficial owner, according to Article 2(3). |
| 2. | Payments made by an economic operator to an entity / arrangement managed within another EUSD territory. | Irrespective of the identity of the beneficial owner, the bank must report on payments to any untaxed entity / arrangement managed in the EUSD territory, else it must withhold 35% tax. | When a bank acts in place of PayingAgnet Upon receipt as per Art 11(5), it can only do so if it immediately withholds tax. It cannot decide at a later stage to identify teh beneficial owner as per Art 2(4). |
| 3. | Capital protected structured products with guarantee of at least a 95% return of principal: | In addition to interest from the zero coupon bond, all gains of the product is also deemed as interest, including derivative and capital gains. | Banks will counter this aggressive treatment by reducing the guarantee threshold below 95%. The 2nd review of the directive will accordingly reduce the threshold to 25% in line with the rest of the thresholds in the directive. |
| 4. | Insurance policies: | Insurance benefit (payout less premium cost) in scope if policy's actual performance contains at least 25% interest. This means withholding tax will be applied to the entire benefit, and not only the interest. | |
| 5. | Life insurance Pensions and Fixed Annuities: | Fixed annuities and insurance pensions will generally be in scope, irrespective of the term paid out, unless the contract specifies a minimum payout of 5 years. | |
| 6. | Paying Agent Upon Receipt exchange of information. | a Paying Agent Upon Receipt must exchange information on its bank accounts even if bank account is held in a country with banking secrecy, e.g. Switzerland, Luxembourg, Singapore, etc. | |
| 7. | Entities and legal arrangements in the 15 third party countries; | Become Paying Agents Upon Receipt when these countries sign up to the amendments, e.g. A Jersey trust or Liechtenstein foundation or Isle of Man company. This means that Annex I part II will be moved to Annex III. | |
| 8. | Settlor or founder of trusts & foundations managed within EU savings tax territory are beneficial owners: | Principal contributor of assets, directly or indirectly, is deemed a beneficial owner of a trust / foundation if there is no identifiable immediate beneficiary. If no principal contributor is identifiable, e.g. deceased estate, then the Paying Agent Upon receipt becomes a Paying Agent Upon Distribution and must apply the savings tax provisions when an individual becomes entitled to the interest within 10 years of receipt. | |
| 9. | An untaxed entity or legal arrangement whose place of effective management is within the EU savings tax territory with bank account outside the savings tax territory.
Eg. Jersey trust with account in Hong Kong: | Must apply the savings tax provisions irrespective of where that account is held. If managed in a territory exchanging information, it must disregard banking secrecy laws of the jurisdiction where the account is held. E.g. a Guernsey company must exchange information on details of its Swiss/ Luxembourg bank accounts. | |
| 10. | Derivatives: | Derivatives are defined as securities. Therefore the definition of interest as per Art. 6(1)(aa)(ii) will encompass derivative contracts and marketable OTC contracts linked to at least 95% interest,e.g. Interest rate swaps, Interest rate caps and floors, Options and LEPOS on bonds if the gains are linked to interest or gains mentioned in Art 6 Par 1(b) eg. LEPOS on zero coupon bonds, bond baskets, bond certificates, mixed certificates, reverse convertibles paying a coupon no matter the duration, etc. | |
| 11. | Non EU entities and legal arrangements | Become Paying Agents Upon Receipt if managed within savings tax territory. E.g. A Panama IBC if management are based in Luxembourg is a Paying Agent Upon Receipt. Note: Art 4(2) takes priority over Art 2(3). | |
| 12. | Place of effective management | Place of effective management does not equate to place where majority of directors are resident. | |
