Cayman Passes Law To Report Savings Income To EU

by Amanda Banks, Tax-News.com, London

27 June 2005

The Caymanian government has passed legislation requiring banks and other financial institutions to pass information on savings interest income to member states of the European Union under the EU's Savings Tax Directive.

According to Cayman Islands Financial Secretary Kenneth Jefferson, quoted by Dow Jones last week, the new law will mean that banks, mutual fund administrators and individuals who offer interest on investments will have to report savings interest income to the home country of the recipient.

Under the legislation, savings income will be reported by paying agents to the Cayman Islands financial secretary, who will in turn pass the information to EU tax authorities.

Many of the UK's offshore territories have been forced to apply the Savings Tax Directive, along with the Netherlands Antilles, Aruba and some European centres (Andorra, Monaco, Liechtenstein, San Marino and Switzerland). Most of these places will withhold tax from interest income for a transtion period of seven years.

The STD applies to many types of return on savings instruments, all loosely described as interest, when received by individuals, but does not affect interest paid to companies. Under the information exchange system, the identity of recipients will be known to their home tax authorities; when tax is withheld, the identity of the recipient will not be reported, thus preserving confidentiality.

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