EU Savings Tax Directive Cayman Islands Update

The Cayman Islands recently has agreed to implement the EU Savings Tax Directive (EUSD) in a modified form. In this respect, the Cayman Islands government has issued a release outlining the scope of the directive, which will be implemented by the Cayman Islands.

The release provides in part that the Cayman Islands has agreed to implement with the member states of the European Union exchange of information measures consistent with the EU Savings Tax Directive with effect from Jan. 1, 2005. The agreement is conditional on all EU member states, all named third countries (Switzerland, San Marino, Monaco, Andorra and Liechtenstein) and associated and dependent territories of member states of the EU (the Channel Islands, the Isle of Man and the dependent or associated territories in the Caribbean) implementing the directive, as well.

The scope of exchange of information measures is very restricted. The implementation will impose obligations only on “paying agents” within the Cayman Islands who make or hold payments of “savings income” for individuals who are tax residents of EU member states. The obligations will require that “paying agents” provide information for EU tax authorities on the amount of payments of “savings income” together with details of the recipients when they are individuals who are tax residents of the EU. Persons, corporate structures, other investment vehicles and institutions that do not fall within the narrow scope of the implementation will be unaffected.