Tynwald Approves Withholding Tax Route For Isle Of Man
by Jason Gorringe, Tax-News.com, London
11 November 2003

The Isle of Man's parliament, the Tynwald, has given its formal approval for the jurisdiction to implement a withholding tax in the initial stages of the new European Savings Directive, which is set to be introduced in January 2005.

In opting for the withholding tax over exchange of information, the island joins fellow UK crown dependencies, Jersey and Guernsey, which have attempted to draw up a joint strategy with regard to the implementation of the directive, in addition to Austria, Belgium, Luxembourg and Switzerland.

The initial minimum rate of withholding tax under the Savings Tax Directive will be 15% on savings interest, rising to 35% by 2011.

According to Isle of Man-based consultants, Acuity, the implications of the directive will affect most financial service providers, although it will particularly impact on collective investment schemes. "While the issues for the banks and deposit takers look relatively straightforward, the same cannot be said for collective investments where complicated rules and reporting may see some fund managers take the easy option of reporting all investors' earnings rather than only the mandatory 'interest' element,' the consultancy observed, according to an Isle of Man Online report in September.

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