Isle of Man/ Jersey withholding Tax option- opinion of interpretation

[milkeybar kid]

Isle of Man/ Jersey  withholding Tax option-your  opinion of interpretation?

 

Isle of Man treasury states Quote- If a customer chooses the exchange of information option instead of withholding tax, details of the customers identity and residence, their paying agent, the level of savings income received and the period to which it relates will be reported to the local tax authority in the country which the account is held and then forwarded to the Tax authority of the country in which the customer is resident.

In practice, banks and other paying agents in the IOM have been given the option to offer to customers the choice between the deduction of withholding tax and exchange of information. The position is therefore more flexible than many EU Member States, where no choice will be offered.

 (Rates  2005 July @15%. July 2008 July35%. July 2011 35%.)

My question – is the above giving you the option of paying a withholding tax and not declaring eg: a savings account held in a bank in the IOM. If not then why is this option being offered – I just can’t fathom this as I thought you had to report all your world income. MBK[8-)]

[PeterG]

Maybe this has something to do with it !!!

http://www.reeves-neylan.com/DocLibrary/Press%20Releases/Tax%20Amnesty%20until%20June%2022.pdf

[Benjamin]

What you have read is quite correct.

When/if you open an offshore savings account in most places in the world now you are given the options which you have read about. If you take the declaration option then you will have to supply your tax details and the savings company then reports as you've read and you will be taxed in the country in which you are resident.

If you decide not to declare then the witholding tax rate is applied (which as you can see is pretty high) and half of that witholding tax is passed, anonymously, to the tax authorities in your country of residence.

You should Google European Savings Directive for a more detailed explanation.

This directive took several years to thrash out between world governments and what were previously known as offshore tax havens. I suspect the option of not declaring and suffering high witholding tax was a bit of a compromise so that an agreement could be put in place.

The rate of witholding tax will only get higher so you must be seriously rich to even consider that option. [:D]

[Owen]

Hello MBK,

As far as French residents are concerned you are legally obliged to declare the IOM account and the interest credited. Opting for the witholding tax method does not change this obligation at all.

Essentially this is an interim measure that allows places like the Isle of Man and the Channel Islands adjust to the the European Savings Directive and in effect the end of bank confidentiality in the EU. Actually the IOM does retain a percentage of the tax in respect of administrative fees. But although the witholding tax is due to rise to 35% by 2011 there is no doubt that the ultimate aim of the EU is to force full disclosure of all accounts held by EU residents.

Many regard banking services in places like the IOM and CI as excellent but I think if you want to bank there then get your interest paid gross and declare all the details to the French "fisc".

Regards

Owen