European Union directive | |
Title | Council Directive on taxation of savings income in the form of interest payments |
---|---|
Made by | Council of the EU |
Made under | Art. 94 |
Journal reference | L 157, 2003-06-26, p. 38 |
History | |
Date made | 2003-06-03 |
Came into force | 2005-07-01 |
Preparative texts | |
Commission proposal | C 270 E, 2001-09-25, p. 259 |
EESC opinion | C 48, 2002-02-21, p. 55 |
EP opinion | C 47 E, 2003-02-27, p. 553 |
Other legislation | |
Replaced by | Directive 2014/107/EU |
Repealed |
The European Union Savings Directive (EUSD), formally Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments, was a directive of the European Union enacted to implement the European Union withholding tax, requiring member states to provide other member states with information on interest paid to achieve effective taxation of the payments in the member state where the taxpayer is resident for tax purposes. [1]
It was an anti-tax evasion measure, similar to FATCA. [2] It was repealed on 10 November 2015, in favor of Directive 2014/107/EU. [3]
Double taxation is the levying of tax by two or more jurisdictions on the same income, asset, or financial transaction.
Although the actual definitions vary between jurisdictions, in general, a direct tax or income tax is a tax imposed upon a person or property as distinct from a tax imposed upon a transaction, which is described as an indirect tax. There is a distinction between direct and indirect tax depending on whether the tax payer is the actual taxpayer or if the amount of tax is supported by a third party, usually a client. The term may be used in economic and political analyses, but does not itself have any legal implications. However, in the United States, the term has special constitutional significance because of a provision in the U.S. Constitution that any direct taxes imposed by the national government be apportioned among the states on the basis of population. In the European Union direct taxation remains the sole responsibility of member states.
Tax withholding, also known as tax retention, pay-as-you-earn tax or tax deduction at source, is income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient. In most jurisdictions, tax withholding applies to employment income. Many jurisdictions also require withholding taxes on payments of interest or dividends. In most jurisdictions, there are additional tax withholding obligations if the recipient of the income is resident in a different jurisdiction, and in those circumstances withholding tax sometimes applies to royalties, rent or even the sale of real estate. Governments use tax withholding as a means to combat tax evasion, and sometimes impose additional tax withholding requirements if the recipient has been delinquent in filing tax returns, or in industries where tax evasion is perceived to be common.
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The European Union withholding tax is the common name for a withholding tax which is deducted from interest earned by European Union residents on their investments made in another member state, by the state in which the investment is held. The European Union itself has no taxation powers, so the name is strictly a misnomer. The aim of the tax is to ensure that citizens of one member state do not evade taxation by depositing funds outside the jurisdiction of residence and so distort the single market. The tax is withheld at source and passed on to the EU Country of residence. All but three member states disclose the recipient of the interest concerned. Most EU states already apply a withholding tax to savings and investment income earned by their nationals on deposits and investments in their own states. The Directive seeks to bring inter-state income into the same arrangement, under the Single Market policy.
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