UK Approaches Bermuda On EU Savings Tax Directive Participation

by Amanda Banks, Tax-News.com, London

18 July 2005

Bermuda's Minister of Finance Paula Cox has told the island's parliament that her department has been approached by the United Kingdom government to begin discussions towards Bermuda's adoption of measures that will see it take a more active part in the application of the European Savings Tax Directive.

“Government supports the principle of fair tax practices and therefore is open to exchange of tax information agreements with other jurisdictions where there is a mutual benefit for both parties to the agreement,” the Minister told lawmakers.

Bermuda is the only British overseas territory not to have been included in the Directive for the purposes of exchanging information on EU citizen's savings accounts with their home member state's tax authorities. However, according to Cox, it has become apparent that the jurisdiction is already being indirectly affected by the new European legislation, which came into force on July 1.

"The upshot is that even though Bermuda is outside of the Directive, the manner in which some countries have applied their home rules which give effect to the Directive has impacted negatively on funds domiciled in Bermuda but whose paying agents are located in a country subject to the Directive, for example, Bermuda domiciled funds whose paying agents are located in Switzerland or Ireland,” she explained.

Cox added that the inconsistencies in the application of home rules was causing a degree of uncertainty for the fund sector in Bermuda, citing the Swiss position as "most problematic".

Cox told parliament that the Finance Ministry will continue to consult with foreign governments to clarify Bermuda's position with respect to the savings tax directive.

It is supposed that Bermuda was left out of the scope of the Directive only because legal draughtspeople in Brussels thought that the island is in the Caribbean.

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