Guidance notes for paying agents on the irish legislation implementing the savings directive

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Published by the Revenue Commissioners – June 2013
1. INTRODUCTION
Revenue contact

avings Directive — Guidelines

GUIDANCE NOTES FOR PAYING AGENTS ON THE IRISH LEGISLATION IMPLEMENTING THE SAVINGS DIRECTIVE

These notes are intended to provide guidance for paying agents on how to operate certain aspects of Chapter 3A of Part 38 of the Taxes Consolidation Act 1997, which implements Council Directive 2003/48/EC on the taxation of savings income in the form of interest payments (the “savings directive”). The notes, by themselves, do not have the force of law, do not affect any person’s legal rights nor do they provide, in all instances, a full statement of the law.

Published by the Revenue Commissioners – June 2013

Contents 2

1. INTRODUCTION 3

Legislative background 3

Revenue contact 3

Relevant Territories 4

2. OVERVIEW 5

Paying Agents 5

Residual Entities 6

Beneficial owners 8

Issues in relation to paying agents 8

3. REPORTING AND OTHER OBLIGATIONS 12

Information to be reported by paying agents 12

Information to be reported by residual entities 13

Audit and penalties 14

4. CONTRACTUAL RELATIONS AND IDENTIFICATION PROCEDURES 15

Overview 15

Meaning of contractual relations 15

Issues in relation to contractual relations 15

Establishing identity — pre-1 January 2004 contractual relationship 18

Establishing residence — pre-1 January 2004 contractual relationship 18

Establishing identity — post-1 January 2004 contractual relationship 18

Establishing residence —- post-1 January 2004 contractual relationship 19

Issues in relation to establishing identity and residence 20

5. INTEREST PAYMENTS 25

Treatment of income payments or distributions by Collective Investment Funds 25

Interest payments to Residual Entities 28

Basis for determining the 15% or 25% tests 28

Payments not regarded as interest 28

Appendix 1 - Flowcharts 30

A. Establishment of identity and residence 30

B. Payments to intermediaries 33

Appendix 2 35

Effective Date 35

EOI or WHT 35

1. INTRODUCTION

Legislative background

Council Directive 2003/48/EC of 3 June 2003, which deals with the taxation of savings income in the form of interest payments, seeks to ensure that individuals resident in an EU Member State who receive savings income from another Member State are taxed in the Member State in which they are resident for tax purposes. The Directive is transposed into national law in Chapter 3A of Part 38 of the Taxes Consolidation Act 1997 (inserted by the Finance Act 2004).

The legislation places certain obligations on paying agents (basically, persons in the State who make or secure interest payments in the course of their business for the benefit of individuals) in relation to

establishing the identity and residence of their customers who are individuals,

retaining records of materials used to identify those customers, as well as records of certain transactions, and

reporting details to Revenue of interest payments made to certain non-resident customers and of dealings with residual entities (first reports were due by 31 March 2006).

The purpose of this Guide is to set out Revenue’s interpretation of certain aspects of the legislation, which have been raised in consultation with various interested parties. The guidelines do not provide, in all instances, a full statement of the law. Comments on the content are always welcome and maybe forwarded to the email address below.

Revenue contact

Where a paying agent requires further information on the issues raised in these guidelines, they may contact the Revenue Commissioners at the following address:

Financial Services 2 Branch,

Corporate Business and International Division,

Stamping Building,

Dublin Castle,

Dublin 2.

Email: CBID-IFS2B@revenue.ie

Paying agents are required, in accordance with procedures set out in the legislation, to establish the identity and residence of beneficial owners who are individuals. Different rules apply depending on when contractual relations between the paying agent and the beneficial owner started. One set of rules applies where contractual relations began before 1 January 2004. Another set applies where contractual relations began on or after 1 January 2004 or where, in the absence of contractual relations, a transaction takes place on or after that date. The application of the rules relating to identity and residence is outlined in detail in Section 4 of these notes.

The legislation concerning the reporting of interest payments made to certain non-residents took effect from the tax year 2005 onwards. Revenue is obliged to provide information to other tax authorities within 6 months of the end of each tax year. The first reports from Irish paying agents, covering the period from 01/07/05 to 31/12/05, were required to be submitted to Revenue by 31 March, 2006 and every 31 March thereafter. Further details on reporting are given in Section 3 of these notes.

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