The EU Savings Tax Directive:

If you are an individual (natural person) who is resident in an EU Member State, and earn bank interest or other savings income on deposits or investments held in your own name in another EU Member State, third country or territory covered by the Directive, then it is likely that you will be affected by the STD.

The Directive does not apply to persons (including EU Nationals) who are resident outside the 25 Member States of the EU or the Crown Dependencies of the UK (Jersey, Guernsey and the Isle of Man). Any new countries joining the EU will be obliged to accept the information-sharing variant of the Directive, and their residents will be caught by the STD as and when those countries accede to the EU.

The Directive came into operation on 1st July, 2005.

There are four main categories of savings income under the scheme:

Interest paid out on debt-claims or credited to accounts;

Interest rolled-up and paid out when a debt-claim is repaid or sold;

Distributions made by certain unit trusts and other collective investment funds which have invested more than 15% of their investments in debt-claims; Accumulated income paid out when units in certain collective investment funds that have invested more than 40% of their investments in debt-claims are redeemed or sold.

In simpler language, savings income is therefore essentially interest earned on bank deposits, interest from, and proceeds on the sale or redemption of, certain bonds and income from certain types of investment funds (principally open-ended money market retail funds).

Most other types of income (for example, dividends on ordinary or preference shares of companies, salary and pension payments) fall outside the definition and are therefore outside the scope of the STD.

You will be paid the interest on your savings gross, ie without deduction of tax, but the bank or other financial institution which you patronise (known as a 'paying agent') will require to provide details of your tax residence. You may be asked for your Tax Identification Number (TIN). This is your tax registration number in your country of residence. The STD requires banks and other paying agents to obtain customers' TINs where possible. Whatever information the banks have, they will pass on to the tax authorities in your country of residence, along with information about the income you have received (as defined above).