Explanatory Memorandum to COM(2004)564-2 - Conclusion of the Agreement with Andorra providing for measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2004)564-2 - Conclusion of the Agreement with Andorra providing for measures equivalent to those laid down in Council Directive ... |
|---|---|
| source | COM(2004)564  |
| date | 17-08-2004 |
Following the decision of 16 October 2001, the Commission wrote to the above non-EU countries to request the opening of negotiations even though it was only after the ECOFIN Council's approval of a text of the draft directive, on 13 December 2001, that the negotiations could really begin. A large number of meetings at both political and technical level have since been held. In accordance with the Council decision of 16 October 2001, the Commission conducted the negotiations in close conjunction with successive Presidencies of the Council. It made regular oral progress reports to the Council and Parliament, and presented a communication on the negotiations with third countries on taxation of savings income to the ECOFIN Council on 3 December 2002. i
On 3 June 2003 the Council stated that the draft agreement with Switzerland submitted by the Commission on 28 May 2003 constituted the final offer for an agreement between the EU and Switzerland. The Council minutes also state:
"The four elements of this agreement relating to savings taxation also constitute the basis for agreements between the European Union and Liechtenstein, Andorra, Monaco and San Marino...".
On 21 January 2003 the Council identified these four elements as:
"- Retention and withholding: Switzerland will apply the same rates of retention and withholding as Belgium, Luxembourg and Austria ...
- Revenue sharing: Switzerland will share the revenue of the retention tax and will accept the 75/25 division applied within the Community ...
- Voluntary disclosure of information
Review clause stating that "The Contracting Parties shall consult with each other at least every three years or at the request of either Contracting Party with a view to examining and - if deemed necessary by the Contracting Parties - improving the technical functioning of the Agreement. In any event when Belgium, Luxembourg and Austria change from withholding tax to automatic exchange of information in accordance with the Directive, the Contracting Parties shall consult each other in order to examine whether the changes to the Agreement are necessary taking into account international developments.
Switzerland grants exchange of information on request for criminal or civil cases of fraud or similar misbehaviour on the part of taxpayers...".
The Agreement with Andorra, which includes these four elements, is now being presented to the Council for signature and conclusion. It is accompanied by a Memorandum of Understanding between the European Community and its Member States, of the one part, and the Principality of Andorra of the other part. In accordance with the conclusions of the ECOFIN Council of 21 January 2003, the Memorandum of Understanding confirms that within the transition period provided for by Council Directive 2003/48/EC of 3 June 2003, i the European Community will enter into discussions with other important financial centres with a view to promoting adoption by those jurisdictions of measures equivalent to those applied by the Community. The Memorandum of Understanding also provides that the same measures will be implemented in good faith and that the Parties will not act unilaterally to undermine this arrangement without due cause. Should any significant difference between the scope of Council Directive 2003/48/EC and that of the Agreement be discovered, the Contracting Parties will immediately enter into discussions with a view to ensuring that the equivalent nature of the measures provided for by the Agreement is maintained. The Memorandum of Understanding also contains a commitment from the Principality of Andorra concerning the introduction in its legislation of the concept of the crime of tax fraud and provides that the Principality of Andorra and each Member State of the European Community wishing to do so will enter into bilateral negotiations to define the administrative procedure for exchange of information. The Memorandum of Understanding states that the Parties solemnly declare that the signature of the Agreement on taxation of savings and the opening of negotiations for a monetary agreement are a significant advance in cooperation between the Principality of Andorra and the European Union. Consequently, and in parallel with the bilateral negotiations to be conducted on the exchange of information procedure, the Principality of Andorra and each Member State of the European Community will hold consultations to define a broader framework for economic and tax cooperation. These consultations will be undertaken in a spirit of cooperation which take account of the efforts made by the Principality of Andorra in approximating its legalisation in the tax field, formalised by the signing of this Agreement. In particular these consultations may lead to the implementation of:
- bilateral economic cooperation programmes to promote integration of the Andorran economy into the European economy;
- bilateral cooperation in the tax field to determine the conditions under which withholding tax on income derived from financial services and products levied in the Member States can be eliminated or reduced.
The Commission considers that the text of the Agreement is in accordance with the negotiating directives adopted by the Council on 16 October 2001. The Council gave its political agreement to the texts of both the Agreement and the accompanying Memorandum of Understanding on 11 May this year.
The Commission proposes that the Council approve the attached proposals:
- for a decision on the signature of the Agreement providing for measures equivalent to those laid down in Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments, and on the approval and signature of the accompanying Memorandum of Understanding, and
- for a decision on the conclusion of the above Agreement under the procedures set by Article 300 of the Treaty establishing the European Community.
Article 300 i of the Treaty establishing the European Community stipulates that the Council shall act unanimously when the Agreement covers a field for which unanimity is required for the adoption of internal rules. As the internal rules in the field covered by this Agreement have been adopted on the basis of Article 94 of the Treaty, the Commission considers that the Council should act unanimously to approve the proposals for a decision. According to the ECOFIN Council conclusions of 21 January 2003, the Council agrees too that the Agreement with the Principality of Andorra should be adopted on the basis of unanimity.