Pursuant to Council Directive 2003/48/EC of June 3 2003 each EU member state will be required to provide to the tax authorities of another member state details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other member state.
The jurisdictions protecting banking secrecy (that is, Belgium, Austria and Luxembourg), however, will not immediately apply such a system of exchange of information, but may instead apply - for a transitional period - a withholding tax on savings income at rates rising over time to 35%.
The Directive is scheduled to be applied by member states from July 1 2005, provided that, inter alia, certain non-EU countries (that is, the US, Switzerland, Andorra, Liechtenstein, Monaco and San Marino) apply from that same date measures equivalent to those contained in the Directive, in accordance with agreements entered into by them with the European Community, following unanimous decisions of the European Council.
For the above purposes, a set of agreements has already been executed with Andorra (see Council Decision 2004/828/EC), Liechtenstein (Council Decision 2004/897/EC) and Switzerland (Council Decision 2004/911/EC).
Following this route a similar agreement between the EU and the Republic of San Marino within Italy has been published (the Agreement) in the Official Journal of the European Union on December 28 2004.
The aim of the Agreement is to ensure the effective taxation of interest payments and "to consolidate and extend the existing close relations between the two Contracting Parties by establishing measures equivalent to those laid down in the Savings Directive".
Pursuant to the Agreement a paying agent located in San Marino shall levy a withholding tax at a rate of 15% during the first three years from the date of application of the Agreement, 20% for the subsequent three years and 35% thereafter, with respect to interest payments made to a beneficial owner which is a resident of an EU member state.
The conclusion of the Agreement is a further step forward in the application of the Directive, which is highly anticipated in the EU market.
Massimo Agostini (MAgostini@gop.it) and Fiore Tinessa (FTinessa@gop.it), Milan
