Savings tax directive in force on July 1

The European Union's Savings Tax Directive, which regulates income earned from savings and other funds held abroad, will come into force on July 1, parliamentary secretary Tonio Fenech said yesterday.

Speaking at a news conference, Mr Fenech said that during the Ecofin (EU finance ministers) meeting last week it was confirmed that the directive would come into effect by this date as all third parties falling under the directive would have ratified the relevant agreement by the end of June.

In the wake of this decision, the government has extended the investments registration scheme for Maltese residents to June 16. He said this was a final opportunity for persons who had not taken up the benefits of previous schemes to register their investments. Under the schemes, any commission due for registration is being paid by government.

Under the directive, there will either be an automatic exchange of information between countries or a withholding tax on the interest accruing from funds in the country where the savings are kept.

The directive applies to all income from savings deposits, corporate and government bonds and other negotiable securities.

Most EU countries, as well as Anguilla, the Cayman Islands, Montserrat and Aruba, will adopt the exchange of information system.

EU countries Belgium, Luxembourg and Austria have opted for the withholding tax, as have Switzerland, Leichtenstein, San Marino, Monaco, Andorra, Jersey, Guernsey, the Isle of Man, the Channel Islands, Antilles, British Virgin Islands, and Turks and Caicos Islands.

These countries will charge 15 per cent between this year and 2007; 20 per cent between 2008 and 2010; and 35 per cent as from 2011. They will retain 25 per cent of the tax and send the remaining 75 per cent to the country of residence of the investor.

In an investment registration scheme in September 2001, the global value of assets or foreign investments registered amounted to Lm291.5 million, Lm55.1 million of which were repatriated.

The scheme was extended for a restricted period between September 1 and November 15, 2003. The global registration under this extension was Lm132.5 million and net registration fees amounted to Lm6.6 million.

Asked whether the government had any idea how much unregistered money Maltese residents had invested overseas, Mr Fenech said the government had no estimates but stockbrokers believed many Maltese still had unregistered funds.