Bermuda Escapes Clutches Of EU Tax Directive

by Amanda Banks, Tax-News.com, London

09 June 2003

According to a report in the Royal Gazette last week, the final agreement on the European Savings Tax Directive does not extend to bank accounts held by EU citizens in Bermuda.

Whilst the general perception during the extensive negotiations for the EU directive seemed to be that Bermuda was included on a list along with UK Offshore dependencies such as the Channel Islands, the Isle of Man and certain Caribbean islands, a statement from an EU spokesman given to the Royal Gazette recently seems to indicate that the contrary is true.

According to this spokesman, Bermuda is not listed in the final communiqué to the agreement and therefore "is not covered by the agreement." The spokesman went on to add that only the Caribbean territories were included in the documents observing that: “Last time I looked, Bermuda was not in the Caribbean.”

The spokesman was unable to confirm whether Bermuda's omission from the EU's Directive was made in error, or in good faith.

The EU spokesman's revelation seems to have come as no surprise to the acting Finance Minister Paula Cox, who commented last week: "I don't think we were ever included" in the agreement. Ms Cox elaborated: "We have an exchange of information agreement, and as long as the proper paperwork is filled and referred to the Attorney General’s chambers, it can be released," but added: "We do not want anyone on fishing expeditions. We do not engage in such matters."

In a written statement from the Ministry of Finance, the Acting Finance Minister confirmed that: "Government has been closely monitoring the development of this directive because of Bermuda’s relationship with the United Kingdom. However, Bermuda is not affected by the directive at this time as Bermuda was not referred to in the Feira Conclusions that initiated the directive in June 2000.”

This document clearly includes the UK's Channel Island dependencies and Caribbean territories, but makes no explicit mention of Bermuda. So it seems, Bermuda may have escaped the long arm of the European tax legislation by a mere quirk of geography.

The Bank of Bermuda meanwhile, is still gearing up for some changes that the will inevitably hit the bank in some of its key overseas operations. "The bank has been monitoring carefully the progress of the EU Savings Tax Directive and is aware that the directive was approved by EU Finance Ministers on 3rd June, 2003 and is now scheduled to come into effect on 1st January, 2005. As the directive applies to EU Member States, their Dependent or Associated Territories and certain “key third countries”, it will have implications for a number of jurisdictions in which we operate," a bank spokesman was quoted by the Royal Gazette as announcing.

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