Life insurance - Follow up on tax information exchange EU Directive proposal on administrative cooperation in the field of ta…

We reported in our Newsletters 2009/02 and n°2009/03 on the new OECD standards with regard to information exchange in tax matters (and their na-tional implementation measures in Luxembourg) and on the revision of the Savings Directive.

Apparently there has not been much progress over the last months with regard to the revision of the Savings Directive and especially the inclusion, in its scope, of some life insurance products.

However on December 7th 2010 the Council of the European Union reached a political agreement on a “Proposal for a Council Directive on administrative cooperation in the field of taxation”.

This new directive proposal is justified, amongst oth-ers, by the fact that “a completely new approach
must be taken by creating a new text to give Member States the powers to efficiently cooperate at interna-tional level to overcome the negative effects of an ever increasing globalisation on the internal mar-ket
” (recital 3).

It shall establish, especially as regards exchange of information, a wider scope of administrative coop-eration between Member States.

Adoption of the OECD standards: Information ex-change “on request” ...

The directive proposal adopts the same standards as on OECD level (cf. our Newsletters 2009/02 and 2009/03): information exchange “on request”, lim-ited to what is “foreseeably relevant” (no “fishing expeditions”) and with the obligation of the re-quested Member State to make the necessary en-quiries to obtain such information.

The situations in which information exchanges might be refused will be clearly defined and limited (certain private and public interests) and a requested Mem-ber State shall never refuse to transmit information because it has no domestic interest or because the information is held by a bank, other financial institu-tions, nominees or persons acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.

... but also automatic information exchange ...

However, the proposal also states that “mandatory automatic exchange of information without precondi-tions is the most effective means of enhancing cor-rect assessment of taxes in cross-border situations and of fighting fraud. To this end, a step by step ap-proach should therefore be fol-lowed starting with automatic ex-change of available information on five categories and reviewing the rele-vant provisions after a report by the Commis-sion” (recital 10).

This means that for taxable periods as from January 1st, 2014 Member States should auto-matically exchange information concerning residents of other Member States on the following specific categories of income and capital:
- income from employment;
- director's fees;
- life insurance products not covered by other Com-munity legal instruments on exchange of information and other similar measures;
- pensions;
- ownership of and income from immovable prop-erty.

... and spontaneous information exchange !

Furthermore, each Member State shall communicate tax information to any other Member State con-cerned, in any of the following circumstances:
- there are grounds for supposing that there may be
a loss of tax in the other Member State;
- a person liable to tax obtains a reduction in or an exemption from tax in the one Member State which would give rise to an increase in tax or to liability to tax in the other Member State;
- business dealings between a person liable to tax in a Member State and a person liable to tax in another Member State are conducted through one or more countries in such a way that a saving in tax may result in one or the other Member State or in both;
- there are grounds for supposing that a saving of tax may result from artificial transfers of profits within groups of enterprises;
- information forwarded to the one Member State by the other Member State has enabled information to be obtained which may be relevant too in assessing liability to tax in the latter Member State.


The new instrument shall apply to direct taxes and indirect taxes that are not yet covered by other Com-munity legislation:
“(1) This Directive shall apply to all taxes of any kind levied by or on behalf of a Member State or the Mem-ber State’s territorial or administrative subdivisions, including the local authorities.
(2.) Notwithstanding paragraph 1, the Directive shall not apply to value added tax and customs duties, or to excise duties covered by other Community legislation on administrative cooperation between Member States. The Directive shall also not apply to compul-sory social security contributions (...)” (article 2).

It shall cover all legal and natural persons, “taking into account the ever increasing range of legal arrange-ments, including not only traditional arrangements such as trusts, foundations and investment funds, but any new instrument which may be set up by taxpayers in the Member States” (recital 7).


It is currently proposed that the Member States im-plement this new directive – if it is adopted in due time – by January 1st 2013.

With regard to the automatic information exchange, Members States shall bring into force the necessary laws, regulations and administrative provisions with effect from January 1st, 2015.


If the revision of the Savings Directive is delayed, does not succeed or, in the end, does not lead to the inclu-sion of life insurance products in its scope, all types of taxes related to such products will however be covered by the information exchange “on request” of this new directive as of 2013 and even be subject to automatic information exchange as of tax year 2014.