Robert Adviser
Joined: 11 May 2009
Posts: 3
Home Country: spain
|
 Posted: Tue May 12, 2009 8:12 am Post subject: Are you paying too much tax on your savings? |
 |
|
If you have savings that earn interest in a tax haven location and you live in the EU you are currently having 20% tax deducted from that interest, this tax rises to 35% in July 2011
I am sure that those people with money on deposit in one of the popular tax haven locations around the world are aware of the “EU Savings Tax Directive”. The European Saving Tax Directive (ESD) came into effect on 1 July 2005 and applies to persons resident in an EU country, on interest received on savings instruments, deposit accounts, etc. etc.
The new rules only apply to EU member states, but because the BVI, Anguilla, Turks & Caicos Islands, Cayman, Isle of Man and Channel Islands are UK dependent territories, they have also adopted and will implement the European Savings Tax Directive (ESD).
There are two systems: 'information exchange' and 'withholding tax'.
Under the 'information exchange' system, the identity of individual recipients will be disclosed to their home tax authorities.
When tax is 'withheld', the identity of the recipient will not be reported, thus preserving individual confidentiality.
Under the withholding tax option, banks and other paying agents will automatically deduct tax from interest and other savings income earned and pass it to their local tax authority, indicating how much of the total amount relates to customers in each Member State.
The rate of withholding tax was introduced at 15% from July 2005, 20% from 1st July 2008, and 35% from July 2011.
Do you want to pay this tax? There is a legal way to avoid this tax from being deducted
Case Study……
Barry and Julie are UK citizens but have been living in Spain for around 5 years. The couple had a reasonable amount of cash sat on deposit with a well known bank on the Isle of Man. This money was used to supplement the income they received from their pensions. In early 2008 they were receiving almost 6% in Interest but were having 15% deducted under the EU Savings Tax Directive. This deduction rose to 20% in July 2008 and they were obviously concerned about the impact of this deduction rising to 35% in 2011.
The situation was compounded by the reductions in Interest rates over the past 12 months and they were only receiving a minimal amount of Interest by early 2009. The couple felt that the money was not working hard enough for them and wanted to seek alternative arrangements.
They consulted a fully licensed and regulated Independent Financial Adviser located close to where they lived in Spain. The Adviser conducted a full financial fact find and recommended placing the money they held on deposit into a “wrapper” to be held in a secure international financial centre.
The “wrapper” is a portfolio bond held with a large international life insurance institution in a safe and secure location. The money has been placed in a diverse set of asset classes, international funds and fixed deposits ensuring that their savings were not all held in one place. It is estimated that with this range of assets within their portfolio that their annual return will be in the region of 6 - 8% per annum.
The “wrapper” is fully compliant with Spanish tax laws and allows them to make ad-hoc withdrawals as and when required without the need for the 20% deduction under the EU Savings Tax Directive. Although they will pay some tax on withdrawals depending on the amount taken the effect is that this tax has lowered to around 6% per annum.
At this moment in time Barry and Julie are obviously in a much better situation than they were with paying the 20% tax deduction. With the increase to 35% tax deducted in July 2011 we believe that many more people with larger sums of cash on deposit in the various international tax havens around Europe will also opt for this solution.
Article submitted by; Expat Investment Adviser
Expat Investment Adviser are a team of investment experts who between them have vast experience in international investments including: property, stock and commodity markets, international funds and wealth management. |
|
Register
Log in
FAQ
Search
Memberlist
