The Guernsey government has released a statement regarding the Isle of Man’s decision to switch from a withholding tax system to the automatic exchange of information from July 1, 2011, when the withholding tax option currently available to customers having accounts with Isle of Man banks as part of a transitional arrangement will be withdrawn.
Under the arrangement agreed with the EU Member States, since July 2005 financial intermediaries in Guernsey have collected a withholding tax, called a ‘retention tax’, on certain types of payment, principally interest, made to residents of an EU country, unless they opt to exchange information with the tax authorities in their country of residence. It is currently estimated that approximately three-quarters of such investments are already subject to the exchange of information option. 25% of the funds collected from the retention tax are retained by Guernsey, while 75% of the tax is remitted to the appropriate jurisdiction.
The rate of retention tax applied rose from 15% to 20% in July 2008 and is due to rise to 35% from July 2011.
The Guernsey government has underlined that it has always considered the withholding tax arrangement to be transitional, and has begun a consultation with industry about a review of the position in the island.
Mike Brown, Chief Executive of the States of Guernsey commented: "The international climate is changing with regards to exchange of information. We are fully aware of those developments and have had the position under review for some time.
"Guernsey’s commitment to the highest international standards in transparency is constant."
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