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Channel Isles And IoM Discuss Joint Approach To EU Tax Directive

by Jason Gorringe,, London

02 September 2003

Government representatives from the crown dependencies of Jersey, Guernsey and the Isle of Man met at Gatwick Airport last week to formulate draft guidelines on a common approach to the European Savings Tax Directive.

The three jurisdictions have all opted to go down the withholding tax route in the initial stages of the directive's implementation in common with Austria, Belgium, Luxembourg and Switzerland, though investors will still have the choice to exchange information on their savings income with the member state in which they are resident. Therefore, given that many financial institutions have a presence in all three jurisdictions their respective governments have deemed it a logical step to coordinate a joint strategy. However, in the case of the Isle of Man, the Treasury's recommendation for the island to introduce a withholding tax will need to be ratified by the Tynwald at its October sitting.

Meanwhile, Jersey is planning to conclude consultations with the finance industry on the draft guidance notes by the end of September, and has already written to the 15 existing member states and the ten acceding states concerning negotiation arrangements for bi-lateral tax treaties, talks towards which are due to start next month.

According to Isle of Man based consultants Acuity, the implications of the directive will affect most financial service providers, though particularly 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 the Isle of Man Online.

Acuity has also warned providers to comply rigorously with the rules concerning investor identity, nationality and residence or risk being "named and shamed" by the tax authorities.

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