Taxation of Savings Income between Jersey and EU Member States: Law drafting instructions for suspension

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A decision made 15 October 2015:

Decision Reference: MD-ER-2015-0056
Decision Summary Title :	To prepare legislation to provide for the suspension of the agreements on the taxation of savings income between Jersey and the EU Member States		Date of Decision Summary:	8 October 2015
Decision Summary Author:	External Relations		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Legislation to provide for the suspension of the agreements on the taxation of savings income between Jersey and the EU Member States		Date of Written Report:	8 October 2015
Written Report Author:	Adviser – International Affairs		Written Report : Public or Exempt?	Public
Subject: To prepare legislation to provide for the suspension of the agreements on the taxation of savings income between Jersey and the EU Member States
Decision To request the Law Draftsman to prepare legislation to provide for the suspension of the agreements on the taxation of savings income between Jersey and the EU Member States
Reason(s) for Decision: The Minister for External Relations approved proposals for the Law Draftsman to prepare legislation to provide for the suspension of the agreements on the taxation of savings income between Jersey and the EU Member States required as a result of the decision of the EU to repeal the EU Directive on taxation of savings income in the form of interest payments.
Resource Implications: There are no financial or manpower implications arising from the law drafting instructions.
Action required: The Minister for External Relations requested that the Adviser – International Affairs submit drafting instructions to the Law Draftsman’s Office.
Signature:		Position: Minister for External Relations
Date Signed:		Date of Decision (If different from Date Signed):

Taxation of Savings Income between Jersey and EU Member States: Law drafting instructions for suspension

Legislation to provide for the suspension of the agreements on the taxation of savings income between Jersey and the EU Member States

Report

In 2004 Jersey voluntarily entered into agreements with Member States of the EU on the taxation of savings income. The agreements mirrored the EU Directive on the taxation of savings income in the form of interest payments (Directive 2003/48/EC).

On 9 December 2014, the European Council adopted Directive 2014/107/EU that extended automatic exchange of information to a full range of income in accordance with the Global Standard released by the OECD Council in July 2014 and ensured a coherent, consistent and comprehensive Union wide approach to the automatic exchange of financial account information in the Internal Market.

When adopting Directive 2014/107/EU the European Council invited the European Commission to present a proposal to repeal Directive 2003/48/EC and to coordinate the repealing of that Directive with the date of application set forth in Article 2 of Directive 2014/107/EU with due regard to the derogation provided therein for Austria.. Therefore, Directive 2003/48/EC should continue to apply to Austria during an additional one year period.

Directive 2003/48/EC is repealed with effect from 1 January 2016. However notwithstanding the repeal, information gathered by paying agents and by Member States until the date of the repeal should be processed and transferred as originally envisaged and obligations which arose prior to that date should be met.

Article 17(3) of the Agreements between Jersey and the Member States provides that the application of the Agreement or parts thereof may be suspended by either contracting party with immediate effect through notification to the other specifying the circumstances leading to such notification should the Directive cease to be applicable either temporarily or permanently in accordance with European Community law.

With the repeal of the Directive Article 17(3) comes into play and Jersey needs to provide for the suspension of the Agreements . Regulation 3 (2) of the Taxation (Agreement with European Union Member States ) (Jersey) Regulations 2005 provides that where notice is given of suspension of all or part of an agreement the Minister shall, by Order, suspend the operation of these Regulations to the extent that they implement so much of the agreement as is suspended.

Legislation is required therefore to reflect the repeal of Directive 2003/48/EC with effect from 1 January 2016 subject to the need to retain the obligations arising from the Agreements in respect of the period leading up to that date (for example, the requirement to provide savings income information for 2015 to the Member States within six months of the end of that tax year.

The provisions of the EU Directive repealing Directive 2003/48/EC are as follows –

“Directive 2003/48/EC is repealed with effect from 1 January 2016.

However, the following obligations under Directive 2003/48/EC, as amended by Directive 2006/98/EC7, shall continue to apply:

(a) the obligations of Member States and economic operators established therein under the second subparagraph of Article 4(2) of Directive 2003/48/EC shall continue to apply until 5 October 2016 or until those obligations have been fulfilled;

(b) the obligations of paying agents under Article 8 and of Member States of paying agents under Article 9 shall continue to apply until 5 October 2016 or until those obligations have been fulfilled;

(c) the obligations of Member States of residence for tax purposes of the beneficial owners under Article 13(2) shall continue to apply until 31 December 2016;

(d) the obligations of Member States of residence for tax purposes of the beneficial owners under Article 14, with regard to withholding tax levied during 2016 and previous years, shall continue to apply until those obligations have been fulfilled.

2. Notwithstanding paragraph 1 of this Article, Directive 2003/48/EC, as amended by Directive 2006/98/EC, shall continue to apply in its entirety with regard to Austria until 31 December 2016, with the exception of:

(a) the obligations of Austria and the underlying obligations of the paying agents and economic operators established therein under Article 12, which shall continue to apply until 30 June 2017 or until those obligations have been fulfilled

(b) the obligations of Austria and economic operators established therein under the second subparagraph of Article 4(2), which shall continue to apply until 30 June 2017 or until those obligations have been fulfilled;

(c) any obligations of Austria and the underlying obligations of the paying agents established therein arising directly or indirectly from the procedures referred to in Article 13, which shall continue to apply until 30 June 2017 or until those obligations have been fulfilled.

3. Notwithstanding paragraph 2 of this Article, Directive 2003/48/EC, as amended by Directive 2006/98/EC, shall not apply after 1 October 2016 to interest payments with regard to accounts for which the reporting and due diligence obligations included in Annexes I and II to Directive 2011/16/EU have been fulfilled and for which Austria has communicated by automatic exchange the information referred to in Article 8(3a) of Directive 2011/16/EU within the deadline laid down in Article 8(6)(b) of Directive 2011/16/EU.