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Automatic Exchange of Information the new reality in Europe?

Fiduciary Wealth Team

The EU plans to have the most robust exchange of information policy in place well ahead of any extension to the EU Savings Directive but what does this mean in reality for investors? 

In 2005 the Savings Tax Directive came into force meaning that data on savings income would automatically be forwarded by the provider to the tax authorities in the individual’s country of residence. However the main thrust of the initiative was to cover savings interest and it is almost certain that the revised Directive will cover the glaring omissions from the first directive namely a wide range of financial instruments as well as payments through trusts, companies and foundations. We predict that the new directive may be in place by the end of this year so there is little time to sort out your affairs and put them in order.

Earlier this year the G5 countries of UK, Spain, France, Germany and Italy signed an agreement to pilot an automatic exchange of information system very similar to the US FATCA regime. This is a concerted attempt by these member states to eradicate financial secrecy and ensure that information passes between tax authorities on a consistent basis. Anyone who thinks that UK HMRC do not speak to Hacienda in Spain and of course vice versa should take a reality check. Twelve other member states are ready to sign up to this agreement apparently.

Tax transparency is now the central theme in Europe and there is no longer a hiding place for undisclosed assets be they in an onshore environment or held offshore wrapped up in a trust or company arrangement.

Often we speak to individuals who think that holding their money in an offshore trust or company or lodging funds outside of the jurisdiction where they live or in faraway places will mean that they are immune from these new initiatives. Unfortunately as we have been at pains to point out this is clearly not the case. The window of opportunity for reorganising your affairs is growing smaller day by day.

If you think you will be affected by this new wave of sentiment you need to take action now rather than leave things until it is too late. The opportunity to rearrange your assets may have already passed but at least whilst it may not be possible to put things right retrospectively at least moving forward your affairs can be straightened out. Indeed the positive news is that for tax residents of many EU countries there are legitimate ways of reducing your tax burden.

Why take the risk of holding undeclared assets when there are perfectly satisfactory options that will allow you to sleep peacefully at night knowing that you are tax compliant in your country of residence.

If you would like the opportunity to discuss ways of mitigating your tax liability in a legitimate and cost effective way why not make an appointment to speak to one of our local advisers at atax and wealth clinic being held in your area. Give us a call on Tel: 956796911 or email enquiries@fiduciarywealth.eu.