We've put together the following information, which we hope will answer any queries you may have on the European Union Savings Tax Directive (the Directive). If you have any further questions please give us a call on +44 (0)1534 885 000. However, if you are in any doubt as to how you are affected by the Directive, we strongly recommend that you seek appropriate professional advice.

What is the EU Savings Tax Directive?

The Directive is an agreement between the Member States of the European Union (EU), which require each Member State to exchange information with each other about EU residents who earn interest on savings and investments in one EU Member State, but live in another. While the automatic exchange of information is the ultimate aim of the Directive, Austria, Belgium and Luxembourg have opted to apply a 'Withholding Tax' system for a transitional period.

Whilst the legal scope of the Directive doesn't extend outside of the EU, certain jurisdictions such as Switzerland, the Channel Islands and the Isle of Man, have agreed to put in place legislation that supports the aims of the Directive. Jersey has agreed to implement a 'Retention Tax' regime together with the option to exchange information at the express consent of the beneficial owner.

The Directive came into force on 1 July 2005.

How does the European Union Savings Tax Directive affect Jersey?

Jersey has voluntarily opted to implement local legislation that supports the Directive. The Island has agreed to implement a 'Withholding Tax' option. This is referred to as the 'Retention Tax' option to distinguish the Island from the EU Member States and reflect that the Island is not part of the EU and therefore not directly subject to the Directive.

So will this affect me?

If you are an individual resident in an EU Member State and you earn interest on an account held with a bank, such as Abbey International, located in Jersey, then you will be affected by the legislation.

If you are living permanently outside the EU but hold a passport issued by an EU Member State, then you should fall outside the scope of the legislation. However, we are required to obtain proof that you are resident outside of the EU.

If I am within the scope of the legislation, how will it affect me?

If the legislation affects you there are three options available to you. These are:

1. Retention Tax
2. Exchange of Information
3. Proof of Exemption

1. Retention Tax

'Retention Tax' is the default option for Jersey. If we determine you are within the scope of the legislation, we are required to apply the 'Retention Tax' to your accounts unless you advise us otherwise. This means that any interest payments made to you by us after 1 July 2005 will be paid net of 15% 'Retention Tax'. This rate will increase to 20% from 1 July 2008 and 35% from 1 July 2011. Interest accrued but not credited to your account prior to 1 July 2005, is not subject to 'Retention Tax'.

To calculate your net interest rate, use our Retention Tax Calculator.

We will pay 'Retention Tax' to the Tax authority in Jersey, who will in turn send it to the EU Member State in which you are resident.

Under this option, none of your details will be passed to the tax authorities.

2. Exchange of Information

You also have the option to exchange information. If you choose this option then the 'Retention Tax' will not be deducted from interest payments made to you. Instead details of your identity and residence, along with details of the level of interest received and the period to which it relates, will be provided by us to the Jersey tax authorities, who will in turn provide this information to the EU Member State in which you are resident.

If you wish to elect to exchange information, then you must complete the attached Customer Election Form. Just fill it in and send it back to us.

3. Proof of Exemption

If you fall within the scope of the legislation, but believe you are exempt, then you may be required to provide us with additional information. Our dedicated helpline will be able to give you further information. If you are unsure about this you should seek appropriate professional advice.

Will this mean I have to pay more tax?

No. On the basis that you are already declaring your interest as income received to your tax authority these changes should have no impact upon the overall level of tax you pay.

If interest payments to you are made net of the 15% 'Retention Tax' then this tax will be available for credit (ie offset) against your tax liability in the EU Members State in which you are resident.

On request we will provide a certificate showing the amount of tax retained and sent to Jersey tax authorities. This certificate may be required by your local tax authority.

How will the legislation affect customer confidentiality rules?

There will be no impact upon customer confidentiality unless you elect in writing to exchange information. If you do not elect to exchange information then no information regarding you or your accounts with us will be provided to the tax authorities.

Further information

If you would like further information please have a look at
www.jerseyfinance.je

You can also contact us if you have any queries:
Tel: 0845 054 4000 or if calling from overseas Tel: +44 (0)1534 885 000
Email: eustd@abbeyinternational.com

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