- Is a non-interest Sharia compliant deposit in a Jersey bank held by a New Zealand limited partnership with a UK-resident general partner within scope?
| Sharia deposits are interest as it guarantees return of at least 95% capital. The Jersey bank as Paying Agent must look through the NZ partnership to the beneficial owner, which is the general partner. |
- Is a Swiss bank account held by UK discretionary trust established by a UK-resident settlor for the benefit of unnamed Canadian family members in scope?
| The UK trust is not in scope as the beneficial owner (the settlor) resides in the same territory. |
- Can any trust elect to be treated as a UCITS?
| No. Legal arrangements cannot elect to be treated as a UCITS. Only entities that are similar to collective investments have the option. |
- Will a capital protected product linked to the FTSE be taxed on its zero coupon gains or all of its profits including derivative gains?
| On all its gains if it promises at least 95% return of capital. |
- Is an individual's bank account in Singapore under a discretionary management agreement by HSBC in Geneva in scope?
| Yes. The Swiss bank is a Paying Agent Upon Receipt as it is a legal arrangement. | |
- Is a Hong Kong company in scope if it has Hong Kong resident nominee shareholders acting on behalf of a French resident and its account in Gibraltar?
| The bank must use money laundering and anti terrorist financing directive to identify the actual beneficial owner of the bank account, i.e. the principal shareholders. It is inconceivable that a bank today would accept that an agent nominee is the beneficial owner of an account. Otherwise any nominee could stand in for owner of a terrorist organisation. |
- Will a Jersey bank distributing their funds' interest via another bank in Hong Kong be in scope?
| Yes. Paying Agents making payment to another economic operator outside the territory must determine the beneficial owner. |
- Is a Panama foundation with bank account in Panama and its council in Zurich in scope?
| Yes. The Council in Zurich would be the Paying Agent Upon Receipt. |
- Are interest rate swaps between two parties within scope?
| No. This is not a security. However, if the swap is marketed to the public, it would be in scope. |
- Is a capital redemption bond issued by a Isle of Man life insurer within scope
If the Member State determines that the CRB is a life insurance policy because it is an insurance policy issued by a life insurance company. |
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- How are the benefits for savings tax purposes of a fixed annuity calculated?
| The insurance company amortizes the premium over the expected life. All payments in excess of this amortized cost, is the benefit. |
- Who is liable for savings tax if the settlor of a Isle of Man discretionary trust is deceased?
| If the trust is managed within the savings tax territory, then the trust becomes a Paying Agent Upon distribution and must keep track of interest earned over ten years and apply the savings tax when an individual becomes entitled to that income. |
- Are Israeli non-resident trusts, Seychelles foundations or Nevada LLCs excluded from savings tax because they are omitted from the directive Annex I?
| The Annex is merely an indicative list. The Paying Agent must look through any entity / arrangement that is established outside the savings tax territory and is effectively untaxed. |
- Are hedge funds in scope if they utilise high leverage so that their interest cost is higher than interest earned?
| No. Interest on loans are within scope. Therefore the fund can net its interest cost on loans against interest earned. If net interest is negative, the fund is not in scope. |
- Is a private investment club of friends & family within scope?
| Yes. Any collective investment, no matter the form or legal incorporation is in scope. |
- Will fiscal authorities learn about all cross-border pensions not included in the savings tax?
| EU Directive on administrative cooperation in the field of taxation. |
- Must a Liechtenstein bank inform authorities on interest payments made to a Liechtenstein trust with German beneficiaries?
| No. Only payments made to untaxed entities and legal arrangements managed in a different territory within the savings tax jurisdiction, i.e. Liechtenstein bank should report payments to a Jersey trust. |
- Will Cayman or BVI non-UCITS equivalent collective investments escape the savings tax, if the Paying Agent in Europe relies on home rules?
| No. |
- Is a Cook Island mutual fund in scope, if held by a New Zealand discretionary trust with a German settlor and unborn Australian grandchildren as beneficiaries ?
| No. |
- Is there a difference in savings tax treatment of a trust whether it is revocable or irrevocable?
| No. |
- Will a Liechtenstein Anstalt which holds all its assets in a Singapore bank be in scope?
| Yes. A Paying Agent Upon Receipt applies savings tax irrespective of where payment is secured. |
- Can one circumvent the savings tax by ensuring each shareholder of an company has a maximum of 20% shareholdings?
| Then the manager will be the beneficial owner owner. Else if company is within the territory, the company becomes a Paying Agent Upon Distribution. |
- Can a paying agent deem a beneficial owner for a Latvia trust if there is neither a named settlor nor any named beneficiaries?
| Trust becomes a Paying Agent Upon Receipt |
- Can a Jersey protected cell established for a German resident but owned by the core managers, be used to avoid the savings tax?
| No. The cell is a paying agent upon receipt, and will know the beneficial owner. |
- Is a Mauritius trust with a 15% tax rate excluded from the directive?
| No. The trust is in scope because the 15% is not a genuine tax rate. That is why the trust is listed in Annex I. |
- Is a Luxembourg life insurance company the Paying Agent if the policy held in a Montserrat trust?
| No. The trust is Paying Agent Upon Receipt. |
- Is a Jersey trust set up for private charitable purposes exempt?
| No. Must be exclusively a public charity. |
- Is a Russian citizen, with dual residence in Canada and Bulgaria, a beneficial owner
| Yes. If he shows EU residency. |
- Can an entity distribute its earned interest to EU resident shareholders as a dividend, salary or loan to avoid the savings tax?
| No. Savings tax provisions are triggered upon receipt of interest. |
- Is there a difference in the application of the savings tax directive if a Gibraltar trust receives interest via a Singapore company versus a Jersey company?
| No. |
- Are Luxembourg bank interest payments to a BVI International Business Company owned by a New Mexico LLC owned by a Guernsey trust within scope?
| Yes. The LU looks at who the manager of the LLC is and sees it is a manger within the EUSD territory. It then reports this payment to The Guernsey authorities. The Guernsey trustee manager of the New Mexico LLC becomes a Paying Agent Upon Receipt. As PAUR, the trustee must apply the EUSD when a beneficial owner becomes entitled to the interest. |
- Is a hedge fund from Bermuda in scope if it invests 80% of its assets in capital guaranteed products issued in 2009?
| No. Grandfathered capital guaranteed interest securities have a permanent grandfather exemption. |
- How must a paying agent treat a "taxable" Somalia company with an EU resident shareholder?
| As there is no functioning Government collecting taxes in Somalia, the company is an untaxed entity which the Paying Agent must look through to the beneficial owner and apply the savings tax. |
- Must a San Marino bank apply the savings tax on an Italian resident who uses his Naples Pizza restaurant company documents to open a bank account?
| No. |
- Is a with profits insurance policy in scope?
| No. There is no guarantee return of capital due to a possible Market Value Reduction (MVR). Also the annual bonuses (insurance company profits) credited to the policy is not regarded as income related to debt assets. |
- Is static a basket of bonds, excluded from scope?
| No. |
- Do payments secured by a Monaco trust count as interest if it invests 10% of its assets in fixed income?
| Can be excluded if Monaco adopts the exclusion below 15% in debt. |
- Are distributions from a Real Estate Investment Trust within scope?
| Yes. |
- Is income from a Managed Futures account within scope?
| Yes. |
- Are hybrid security products such as Payment-in-Kind or Preference shares in scope?
| Yes. |
- Is a BVI company within the savings tax scope if it is effectively managed from Singapore?
| Only if it has a bank account within the savings tax territory. In this case, the Paying Agent would look through the company to the beneficial owners. The BVI company is not a Paying Agent Upon Receipt because an entity or legal arrangement is only a Paying Agent Upon receipt if its effectively managed from within the EU savings tax territory, irrespective of where it is established. |
- What happens if a BVI company managed by a UK resident does not agree that the Jersey bank report information on the interest payment?
| Jersey bank must withhold 35% tax on the interest payment |
- What happens if a Panama company owned by a Liechtenstein foundation with a Russian founder does not agree that the Swiss bank report information on interest payments?
| Bank must withhold 35% tax on interest payment even if beneficiary is not a EU resident. |
- What happens if a Belgian citizen with a bank account in Luxembourg is unable prove he is resident in Monaco?
| Subject to savings tax. |
- Is a Council of a Panama foundation with bank account in Andorra a Paying Agent Upon Receipt or does the Andorra bank look through the foundation at the beneficiaries?
| Article 2(1)(b) actually helps understand. In case of difference of the country of establishment and the country where is the place of effective management, the individual acting on behalf of the foundation should have to disclose both, so the economic operator making an interest payment would not have any other choice than applying the fourth subparagraph of Article 4(2) or the provisions of Article 11(5). In respect to this, and in case of doubt, the provisions of Article 2(3) could only raise an issue of duplication of reporting or withholding, article 4(2) would 'de facto' have the priority.
Therefore the Council in Andorra would be Paying Agent upon receipt. |
- Why is a Sukuk bond out of scope, whilst a Sharia deposit is in scope
| A Sukuk bond pays income payments are profits. However the bond holder is not guaranteed profits nor his capital back as he is sharing risk with the issuer. Therefore out of scope.
The Sharia deposit on the other hand, guarantees return of capital, and therefore falls into definition of interest as per Art 6(1)(aa)(i). |
