The European Commission is to present a proposal to amend the Savings Taxation Directive in an attempt to ensure more effective taxation of savings income and eliminate undesirable loopholes that facilitate tax evasion and tax fraud. Since 2005, the Directive has ensured that paying agents, such as banks, financial institutions and independent professionals, either report interest income received by taxpayers resident in other EU Member States or levy a withholding tax on the interest income received.
The first review of the Directive has shown that, at present, it is relatively easy for individuals to circumvent the rules by using interposed legal persons or arrangements that are not taxed, such as certain foundations or trusts. The Commission proposal therefore seeks to improve the Directive so as to better ensure the taxation of interest payments that are channelled through intermediate tax-exempted structures. It also proposes to extend the scope of the Directive to cover income equivalent to interest obtained through investments in certain innovative financial products and certain life insurance products. Moreover, simplification of the technical operation of the Directive should lead to a more user-friendly system and more efficient implementation.