Report from the Commission to the Council in accordance with Article 18 of Council Directive 2003/48/EC on taxation of savings income in the form of interest payments {SEC(2008) 2420}
Date: 2008-09-15
Institutions: European Commission
Subjects: application of EU law, exchange of information, interest, savings, tax on income, tax system

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 15.9.2008 
COM(2008) 552 final 

REPORT FROM THE COMMISSION TO THE COUNCIL  

in accordance with Article 18 of Council Directive 2003/48/EC on taxation of savings 
income in the form of interest payments 

{SEC(2008) 2420} 

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REPORT FROM THE COMMISSION TO THE COUNCIL  

in accordance with Article 18 of Council Directive 2003/48/EC on taxation of savings 
income in the form of interest payments 

Introduction 

Art. 18 of Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the 
form  of  interest  payments  (the  "Directive")  states  that  "The  Commission  shall  report  to  the 
Council every three years on the operation of this Directive. On the basis of these reports the 
Commission  shall,  where  appropriate,  propose  to  the  Council  any  amendments  to  the 
Directive that prove necessary in order better to ensure effective taxation of savings income 
and to remove undesirable distortions of competition."  

This  first  report  draws  on  consultations  held  with  the  EU  Member  States'  ("MS")  tax 
administrations, data provided by them on the first two tax years of application, and findings 
of an Expert group set up by the Commission in 2007  to seek advice from business  sectors 
concerned or likely to be concerned by the Directive. For more details, see: 

http://ec.europa.eu/taxation_customs/taxation/personal_tax/savings_tax/savings_directive_review/index_en.htm 

The  Report  covers  the  transposition  and  implementation  of  the  Directive,  and  sums  up  the 
economic  evaluation  (details  in  the  Commission  Staff  Working  Document  SEC(2008)2420) 
and the Commission's advice on the need for changes. 

1. 

TRANSPOSITION AND IMPLEMENTATION OF THE DIRECTIVE  

All MS have transposed the Directive and started applying the implementing rules from the 
scheduled  dates  (i.e.  1  July  2005  and,  for  Bulgaria  and  Romania,  1  January  2007).  The 
Commission  has  so  far  opened  two  infringement  procedures  concerning  the  implementation 
of  the  Directive.  A  letter  of  formal  notice  has  been  sent  inviting  the  two  MS  concerned  to 
submit their observations. One case relates to incomplete transposition of Art. 4(3), allowing 
entities  which  are  paying  agents  under  Art.  4(2)  to  opt  to  be  treated  as  a  UCITS1  for  the 
purposes of the Directive. The other concerns the non-application of the Directive where the 
beneficial owner has "non-domiciled" status. The MS concerned considers that the Directive 
is not applicable if the beneficial owner is exempted in his MS of residence. The Commission 
does not share that view. 

The Commission has monitored the exchanges of information made using a common format 
based  on  the  OECD  Standard  Magnetic  Format  and  the  CCN-Mail  2  channel  of 
communication.  All  exchanges  in  2006  and  2007  took  place  on  time  and  without  technical 
problems.  However,  especially  during  the  first  year,  MS  reported  some  difficulties  in 
identifying taxpayers, due to lack of information on their tax identification number ("TIN") or 
date/place  of  birth.  The  Commission  facilitated  the  reporting  of  some  statistical  data  and 
hosted meetings to allow tax administrations to exchange experience. 

1 

Undertakings  for  collective  investment  in  transferable  securities  authorised  in  accordance  with 
Directive 85/611/EEC 

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2. 

ECONOMIC EVALUATION  

Data  from  MS  are  available  for  the  second  half  of  2005  and  for  2006.  Longer  time  series, 
including the period prior to the introduction of the Directive, would have made it possible to 
better assess its effects.  

2.1 

Data from participating countries 

Collecting  and  reporting  this  type  of  data  is  a  new  task  for  many  countries  which  might 
explain why values are missing especially on information exchange. Additionally, definitions 
of  data  treatment  have  not  yet  been  agreed.  These  factors  restricted  the  analysis  that  the 
Commission could perform. 

Unsurprisingly, the largest economies exchanging information as provided in Articles 8 and 9 
report the highest values. UK reported EUR 9.1 b for payments made from 1 July 2005 to 5 
April 2006 (end tax year).  

The  major  part  of  revenue  from  the  withholding  tax  in  2005  and  2006  was  raised  in 
Switzerland and Luxembourg, which respectively accounted for more than 45% and 22% of 
the total revenue. In the tax years 2005 and 2006, the largest beneficiaries of withholding tax 
revenues  were  Germany  (EUR  192.7 mio)  and  Italy  (EUR  112.9  mio).  Belgium  received 
more than EUR 71 mio, mainly from Luxemburg (74% of the total).  

2.2 

Results from data sources  

The Bank for International Settlements (BIS) collects data on the external positions of banks 
in  about  40  reporting  countries.  BIS  has  provided  non-publicly  available  data  on  bilateral 
cross-border loans and deposits for its reporting countries (only Singapore and Macao refused 
to disclose their bilateral data) for the period 2000-2007. Countries were classified into three 
categories: those applying the withholding tax under the Directive and the related agreements, 
those applying the exchange of information under these legal provisions and third countries. 
Notwithstanding structural breaks in the data, the share of withholding tax countries as a % of 
total  deposits  has  decreased  from  35.0%  to  29.3%  between  mid-2003  and  mid-2005  but 
stabilised after the introduction of the Directive. Countries that exchange information have a 
larger  bank  to  non-bank2  deposit  ratio  and  their  share  of  non-bank  deposits  has  slightly 
decreased, albeit this occurred before the Directive came into force. 

EUROSTAT data analysed includes the aggregated interest income split by recipients for 20 
EU Member States during the years 2000 to 2006. Here again, the analysis does not show any 
significant  change  following  the  implementation  of  the  Directive.  The  share  of  interest 
received by households in the total interest received by individual and corporate recipients has 
decreased but this is mainly due to an increase in financial corporations' receipts. Equally, the 
share  of  interest  in  total  property  income  received  by  households  has  declined  in  favour  of 
dividends but this phenomenon started already in 2000.  
Finally, the available data on UCITS and non-UCITS3 between 2002 and 2007 provided by 
the  European  Fund  and  Asset  Management  Association  shows  that  their  share  remained 
constant at 78% and 22% respectively. The only noticeable evolution is a gradual decrease of 
UCITS  investing  in  bonds  from  29%  to  19.5%  of  the  total,  mostly  for  the  benefit  of  those 

2 

3 

Here "bank" refers to deposits by banks and "non-bank" to deposits by others including individuals and 
companies 
Undertakings  for  collective  investment  in  transferable  securities  not  authorised  in  accordance  with 
Directive 85/611/EEC 

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investing in equity. Here again, this is a phenomenon present prior to the introduction of the 
Directive. 

3. 

POSSIBLE IMPROVEMENTS  

The Directive has proven effective within the limits set by its scope. It has also had indirect, 
non measurable, positive results in enhancing taxpayers' compliance with their obligations to 
declare interest income. However, the review process evidences that the current coverage of 
the Directive is not as wide as the ambitions expressed in the unanimous Council conclusions 
of 26 and 27 November 2000.  

Therefore the Commission advocates certain amendments to address the following issues: 

Beneficial ownership;  

Definition of paying agent; 

Treatment of financial instruments equivalent to those already explicitly covered; 

Procedural aspects.  

Commission  Staff  Working  Document  SEC  (2008)559  "Refining  the  present  coverage  of 
Council Directive 2003/48/EC on taxation of income from savings" ("CSWD 559"), together 
with other material available on the webpage mentioned in the introduction, complements the 
analysis of the solutions presented below. 

3.1 

Beneficial  ownership  and  payments  to  entities  and  arrangements  established 
within and outside the EU 

In  line  with  the  ultimate  aim  of  the  Directive,  Articles  1  and  2  deal  only  with  interest 
payments  made  for  the  immediate  benefit  of  individuals  and  not  with  payments  to  legal 
entities  and  arrangements.  This  targeted  scope  may  provide  individuals  resident  in  the  EU 
with  opportunities  to  circumvent  the  Directive  by  using  an  interposed  legal  person  or 
arrangement.  

As explained in Section 2.1 of the CSWD 559, an indiscriminate extension of the Directive to 
cover all payments to legal entities and arrangements established in other MS would not seem 
an  appropriate  solution.  The  achievement  of  the  ultimate  aim  of  the  Directive  requires  that 
both  the  individual  who  is  the  beneficial  owner  and  his  MS  of  residence  are  known. 
Furthermore,  it  would  be  of  no  help  where  the  EU  resident  individual  invests  through  an 
intermediate  legal  person  or  arrangement  established  in  a  non-EU  jurisdiction  (possibly 
subject to low or no taxation on interest income).  

A  more  efficient  solution,  in  line  with  the  Directive's  present  scope  and  its  ultimate  aim, 
would  consist  of  asking  paying  agents  to  use,  when  not  disproportionately  burdensome,  the 
information already available to them about the actual beneficial owner(s) of a payment made 
to  a  legal  person  or  an  arrangement  ("look-through"  approach).  This  is  similar  to  what  is 
already required under Art. 2(2) for payments made to individuals who are known not to be 
the actual beneficial owner. Useful indicators are the "customer due diligence" measures that 
financial  institutions  and  professionals  within  the  EU  are  obliged  to  apply  to  fight  against 
money  laundering4.  These  provide  practical  criteria  to  be  used  by  such  institutions  and 

4 

Directive  2005/60/EC  of  the  European  Parliament  and  of  the  Council  of  26  October  2005  on  the 
prevention  of  the  use  of  the  financial  system  for  the  purpose  of  money  laundering  and  terrorist 
financing 

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professionals to identify the individual beneficiary on whose behalf a corporate or other legal 
entity or an arrangement concludes a transaction.  

It should nevertheless be noted that these criteria are not always relevant for identifying the 
beneficial owner for the purposes of the Directive. Where economic operators established in 
the  EU  make  interest  payments  to  other  economic  operators  (entities  or  arrangements)  also 
established  in  the  EU  and  therefore  falling  within  the  definition  of  "paying  agent",  a 
clarification of the definition and the obligations of paying agents (see section 3.2) seems a 
more  reliable  and  proportionate  solution  than  a  mere  "look-through"  approach  based  on 
"customer  due  diligence"  measures.  A  selective  application  of  the  "look  through"  approach 
could,  however,  be  considered  for  payments  to  specific  categories  of  legal  entities  and 
arrangements  established  in  targeted  jurisdictions  outside  the  EU,  likely  to  be  used  for  tax 
evasion  by  EU  resident  beneficial  owners.  A  list  of  those  jurisdictions  and  their  relevant 
entities and arrangements would then have to be annexed to the Directive. Procedures should 
be provided for adapting the annex to evolving needs.  

In parallel with such a selective application of the "look-through" approach, it would be worth 
clarifying  the  responsibility  of  the  EU  economic  operators  when  they  are  aware  that  an 
interest payment made to an operator established outside the territorial scope of the Directive 
(and of the related agreements) is made for the benefit of an individual, known by them to be 
a resident of another EU MS and who can be considered their customer. This would also help 
to prevent a  possible misuse  of  the international  network  of  financial  institutions (branches, 
subsidiaries,  associated  or  holding  companies)  to  circumvent  the  Directive  (and  the 
agreements).  

3.2 

Definition of paying agent  

Experience so far raises questions about the appropriateness of the definition of paying agent 
contained in Art. 4. While the broad concept of “economic operator who pays interest to or 
secures  the  payment  of  interest  for  the  immediate  benefit  of  the  beneficial  owner”,  in 
paragraph 1, has proved to be relatively well understood and does not appear to need major 
changes apart from those clarifying the responsibility of these agents for payments to parties 
outside  the  EU  (see  last  paragraph  of  section  3.1),  the  additional  concept  of  “paying  agent 
upon  receipt”  developed  in  paragraphs  2  to  5  of  the  same  Article  seems  to  have  generated 
more uncertainty. While causing costs for the EU economic operators, it has not produced all 
the  results  expected  by  MS.  Some  economic  operators,  notably  banks,  have  called  for  this 
concept to be abandoned. 

Without alternative mechanisms covering payments to intermediate structures within the EU 
(like  an  extended  “look-through  approach”,  cf.  third  paragraph  of  section  3.1),  this  could 
however encourage individual beneficial owners to make extensive use of such structures to 
circumvent  the  Directive.  Recent  cases  of  tax  evasion,  involving  non-EU  countries  already 
cooperating  with  the  EU  on  taxation  of  savings,  have  shown  that,  where  the  “paying  agent 
upon receipt” concept is not consistently implemented, room is left for abuse and distortions. 
Investment funds regulated at EU level, whose income is taken into account for the purposes 
of  the  Directive  (Art.  6),  could  face  unfair  competition  from  other  intermediate  investment 
structures,  “de  facto”  excluded  from  the  main  definition  of  paying  agent  in  Art.  4(1)  since 
payments  made  by  them,  even  if  generated  by  investment  in  debt  claims,  do  not  legally 
qualify as interest payments. 

Rather  than  abandoning  the  “paying  agent  upon  receipt”  concept,  the  Commission  would 
suggest  clarifying  this  concept  to  ensure  its  consistent  application.  A  possible  way  forward 
would  be  to  pass  from  the  present  approach,  where  the  main  focus  is  on  the  upstream 
economic  operator  paying  interest  to  the  entities  concerned,  to  an  approach  based  on  a 

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“positive” definition of the intermediate structures to be charged with obligations to act as a 
“paying agent upon receipt”. 

This approach makes clear that these intermediate structures must apply the provisions of the 
Directive insofar as any of their beneficial owners is an individual who is resident in another 
EU  MS.  This  would  happen  upon  receipt  by  these  structures  of  any  interest  payment  as 
defined in Art. 6, from any upstream economic operator, not only those established in other 
MS  (Art.  4(2),  last  sentence)  or  in  the  same  MS  (Art.  4(4)),  but  also  those  outside  the  EU. 
This would improve the effectiveness of the Directive and better safeguard fair competition 
between upstream economic operators within and outside the EU. 

In order to avoid market distortions, a “positive” definition of the structures acting as “paying 
agent upon receipt” should be based on substantial elements rather than on their legal form. 
The  decisive  criteria  should  not  be  whether  the  structure  is  an  arrangement  or  an  entity  or 
whether it has legal personality or not. In view of the aim of the Directive, the Commission 
favours  a  definition  including  all  entities  and  arrangements  which  are  not  taxed  on  their 
income, including income covered by Art. 6, under the general rules for direct taxation 
applicable in the MS in which the entity or arrangement has its main centre of administration 
and can be considered to be resident. Only the following entities and arrangements should be 
excluded: 

Investment funds covered by Art. 6; 

Pension funds and assets relating to life insurance contracts; 

Entities and arrangements set up exclusively for charitable purposes. 

The option in Art. 4(3) to be treated as an investment fund under Art. 6, would be maintained 
only for those entities and arrangements whose assets or income are not legally attributable to 
any  beneficial  owner  at  the  moment  of  receipt  of  the  payment.  If  they  do  not  exercise  this 
option, they could be obliged to act as “paying agents upon receipt” and to treat as beneficial 
owners those individuals who contributed to their assets.  

A  “positive”  list  covering,  for  each  MS,  the  categories  of  entities  and  arrangements  to  be 
considered  as  “paying  agents  upon  receipt”  would  be  annexed  to  the  Directive,  and 
procedures  would  be  provided  for  adapting  this  annex  to  evolving  needs.  The  current 
obligations on “upstream” economic operators under Art. 4(2), last sentence (and Art. 11(5)) 
would  be  maintained  only  for  interest  payments  made  to  those  entities  and  arrangements  in 
other  MS  that,  having  regard  to  their  MS  of  residence,  are  included  in  this  “positive”  list. 
However,  the  list  would  only  have  indicative  value  for  the  MS  of  which  the  entities  and 
arrangements  corresponding  to  the  definition  of  “paying  agent  upon  receipt”  are  residents: 
these MS should take the necessary measures to ensure that all such entities and arrangements 
comply with their obligations, regardless of whether they are included in the positive list and 
of the information actually received from foreign upstream economic operators. 

3.3 

Income included in the scope  

In  accordance  with  its  title  and  its  preamble,  the  Directive  is  essentially  aimed  at  ensuring 
taxation of savings income in the form of interest, which is taxable under rather homogeneous 
criteria in all MS. Through the adoption of the Council conclusions of 26 and 27 November 
2000 on the essential content of the Directive, it was de facto acknowledged that sticking to a 
formal  definition  of  interest  payment  would  not  be  effective  and  could  lead  to  undesirable 
distortions of competition between direct and indirect investment in debt claims. In addition 
to Art. 6(1)(a) and (b) of the Directive, where interest is defined as income from debt claims 
in conformity with art. 11 of the OECD Model Tax Convention on income and capital, it was 

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therefore  decided  to  extend  the  definition  also  to  interest  income  obtained  through  the 
intermediation of some investment vehicles (Art. 6(1)(c) and (d)).  

When the Directive became applicable in 2005, it was apparent that further refinements would 
be  advisable  to  take  account  of  the  evolution  of  savings  products  and  of  the  behaviour  of 
investors.  Domestic  tax  systems  have  also  evolved  over  time  to  assimilate  the  treatment  of 
income from some types of innovative financial products to interest from debt claims.  

The  original  choice  to  exclude  all  innovative  financial  products  from  the  scope  of  the 
Directive (ECOFIN Council conclusions of May 1999 and November 2000) was accompanied 
by  an  express  statement  that  this  issue  should  be  re-examined  on  the  occasion  of  the  first 
review of the Directive. There is a need for clarity on which financial instruments would be 
brought  into  the  scope  of  the  Directive  and  a  need  for  consistent  and  simple  solutions.  The 
aim should be to find a definition covering all securities that are equivalent to debt claims so 
as to ensure the effectiveness of the Directive in a changing  environment  and to preventing 
market distortions. 

Annexing  to  the  Directive  a  list  of  the  types  of  instruments  concerned  does  not  seem 
workable. Instead, criteria should be enshrined in Art. 6(1) in order to allow the paying agents 
to  identify  instruments  falling  within  the  Directive.  As  the  technical  characteristics  of  the 
instruments, like their composition or the link between their performance and income of debt 
claims, are frequently not known by the paying agents, practical criteria to extend the scope of 
the  Directive  to  those  securities  which  are  equivalent  to  debt  claims  should  rather  make 
reference to how the investors appreciate the securities concerned. One could fairly consider 
that an individual investor appreciates as equivalent to debt claims those securities whose risk 
is  known,  because  of  the  prospectus  or  other  compulsory  information  to  be  provided  by 
paying agents to the investors, and is not higher than that of debt claims. This would result in 
adding to the scope of the Directive any income from securities where the capital is totally or 
almost totally protected and the return defined ex ante, bearing in mind that these securities, 
while  in  principle  equivalent  to  debt  claims  from  an  investor  perspective,  need  not  be 
composed of debt claims but could be based for instance on gains from shares.  

In  parallel  to  the  re-examination  of  the  treatment  of  innovative  financial  products,  other 
refinements  to  the  current  definition  of  interest  payment  could  be  considered  in  relation  to 
investment funds, technically defined as undertakings for collective investment (Art. 6(1)(c) 
and 6(1)(d) of the Directive). 

As  regards  undertakings  for  collective  investment  established  in  the  EU,  Art.  6  of  the 
Directive at present explicitly covers only income obtained through UCITS funds (cf. footnote 
1). Other collective investment schemes authorised under national regimes of MS and known 
in  the  EU  as  “non-UCITS”  are  not  fully  captured  by  the  Directive.  Their  treatment  varies 
between those non-UCITS with legal personality (incorporated funds) and those non-UCITS 
that lack legal personality (unincorporated or "contractual" funds and trusts, etc.). The former 
are  not  subject  to  the  obligations  laid  down  by  the  Directive,  whereas  unincorporated  non-
UCITS are subject to the Directive as “paying agents on receipt” (Art. 4(2)). The result is an 
asymmetry in treatment between UCITS and unincorporated non-UCITS on the one hand, and 
incorporated  non-UCITS  on  the  other.  This  disparity  in  fiscal  treatment  between  different 
categories of investment funds in the EU is neither in the interest of the Internal Market nor 
was  it  intended  under  the  ECOFIN  Council  conclusions  of  November  2000  defining  the 
essential content of the Directive. This could justify an amendment to Art. 6(1)(c) and (d) of 
the Directive in order to replace the reference to the Directive 85/611/EEC with a reference to 
the  registration  of  the  undertaking  in  any  of  the  MS.  However,  the  full  set  of  collective 
investment schemes that could be usefully brought within the scope of the Directive needs to 

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be  attentively  identified  and  defined,  and  the  practical  consequences  of  such  an  extension 
examined. 

As  regards  funds  established  outside  the  EU,  it  is  at  present  not  clear  whether  the  term 
"undertakings  for  collective  investment  established  outside  the  territory"  encompasses  all 
investment  funds  irrespective  of  the  regulation  applicable  and  of  how  they  are  placed  to 
investors. An appropriate solution could be to refine this definition according to criteria which 
could be shared with countries outside the EU and which would ensure that interest income 
channelled  through  these  vehicles  is  appropriately  taken  into  account,  irrespective  of  their 
geographic location. The existing OECD definition of “collective investment fund or scheme” 
seems a good basis for a possible amendment to Art. 6, as it includes any pooled investment 
vehicle,  irrespective  of  legal  form,  and  is  simple  and  wide  enough  to  minimize  the  risk  of 
circumvention.  

Some MS have called for a more radical extension of the scope of the Directive to any kind of 
investment income, but those views are currently not widely shared. For the reasons explained 
in  the  CSWD  559,  this  Directive  may  not  be  the  most  suitable  framework  for  improving 
cooperation  between  tax  authorities  on  payments  of  dividends  and  on  capital  gains  from 
speculative  financial  instruments  which  do  not  provide  substantial  capital  protection. 
Solutions  based  exclusively  on  exchange  of  information  would  also  seem  more  appropriate 
for the purpose of ensuring that neither double taxation, nor avoidance of any taxation, arise 
in  relation  to  life  insurance  contracts  and  pensions.  However,  until  such  purely  information 
exchange solutions become  fully  operational between all MS, it could be worth  considering 
transitional  provisions  extending  the  scope  of  the  Directive  at  least  to  benefits  from  life 
insurance  contracts  providing  no  significant  biometric  risk  coverage  whose  performance  is 
strictly linked to income from debt claims or equivalent income covered by Art. 6 and which 
have characteristics (notably liquidity) allowing them to be marketed as substitute products to 
undertakings for collective investment. 

3.4. Other refinements  

There are also more procedural areas, where, on the basis of the experience, improvements to 
the Directive would be desirable for the sake of effectiveness. These relate to: 

- the identification of beneficial owners (Art. 3); 
- some procedural elements of the definition of interest payment (Art. 6); 
- the information reporting by the paying agent (Art. 8);   
- the exceptions to the withholding tax procedure (Art. 13), and   
- some complements to Art. 18 (review) concerning statistics from Member States. 

As  regards  Art.  3,  three  refinements  seem  advisable.  The  first  would  consist  of  ensuring  a 
regular  updating  of  the  information  on  the  permanent  address  of  the  beneficial  owner  for 
establishing his residence for the purposes of the Directive, by asking paying agents to refer to 
the “best information available to them at a payment date”. This would include information 
required  for  anti-money  laundering  purposes  or  other  evidence  to  be  agreed  between  MS 
through consultation procedures. Secondly, the paying agent could be obliged to replace this 
minimum "permanent address" approach with one based on official proof of tax residence in a 
specific country when such proof has been voluntarily provided by the beneficial owner to the 
paying  agent,  whether  for  the  purposes  of  the  Directive  or  for  other  purposes.  A  third 
refinement  could  consist  of  detailing  the  conditions  under  which  paying  agents  request  the 
beneficial  owners'  TIN,  by  annexing  to  the  Directive  a  list  of  the  MS  which  provide  their 
resident  individuals  with  a  TIN  and  the  official  documents  on  which  this  TIN  is  mentioned 
(and the TIN format to prevent errors). 

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A procedural aspect of Art. 6 deserving consideration is how to create conditions for a reliable 
application of the home country rule. This is a necessary element for allowing paying agents 
to  apply  the  Directive  to  income  arising  from  undertakings  for  collective  investment 
established in other countries. All the options adopted by a MS for its undertakings should be 
binding  on  the  other  MS.  A  range  of  acceptable  criteria  for  the  weighting  of  assets  of  the 
undertakings  could  be  agreed  in  order  to  provide  greater  consistency.  An  agreed  list  of 
reliable  data  providers  could  be  annexed  to  the  Directive  and  a  procedure  for  its  updating 
provided.  These  data  providers  should  notably  be  capable  of  ensuring  the  reliability  of  data 
for undertakings established outside the EU.  

Two  refinements  seem  advisable  to  Art.  8.  First,  in  order  to  solve  the  current  uncertainties 
concerning the treatment of joint accounts and shared beneficial ownership, the paying agents 
could  be  requested  to  provide  some  additional  information  on  the  features  of  the  payment 
(whether the amount reported is the full amount, the actual share due to the beneficial owner 
or an equal share). Secondly, it would seem advisable to overcome the current limits of Art. 
8(2), which do not oblige MS to distinguish between amounts referring to the interest element 
of a payment and those referring to the full proceeds from a sale, redemption or refund of debt 
claims  or  parts  in  UCITS.  This  lack  of  detail  undermines  the  value  of  the  information 
exchanged and increases the administrative burden for the State of residence of the beneficial 
owner in a way which is disproportionate to the burden on the paying agent and its State of 
establishment  in  providing  the  detail.  It  also  makes  it  more  difficult  to  measure  the 
effectiveness of the Directive. 

As to Art. 13, the Commission would suggest to the Council to examine if the procedure for 
exception to the withholding tax on the basis of a certificate submitted by the beneficial owner 
could  be  abolished.  This  procedure  provides  less  detail  to  the  State  of  residence  of  the 
beneficial owner and is less practical for the latter than the alternative procedure of voluntary 
disclosure and exchange of information. The additional burden put on the tax administration 
of the State of the paying agent by the compulsory application of this second procedure would 
seem  justified.  Moreover,  the  application  of  the  certificate  procedure  can  raise  questions  of 
compatibility with the free movement of capital, e.g. because it makes it difficult for an EU 
citizen  who  is  tax  resident  outside  the  EU  to  avoid  a  withholding  tax  for  which  he  cannot 
obtain a credit or reimbursement.  

Finally, Art. 18 could be complemented by an obligation for MS to share between themselves 
and  with  the  Commission  in  a  timely  manner  some  key  statistics  in  order  to  allow  a 
comprehensive measurement of the effectiveness of the Directive. This could be sustained by 
some  additional  but  proportionate  requirements  on  paying  agents  to  contribute  some  more 
information to tax administrations (e.g.: number of beneficial owners subject to withholding 
tax under the Directive).  

EN 

9 

   EN