Currently, it is difficult for EU member states to collect taxes on the income earned by their residents from savings and other investment instruments in another member state.

The EU savings tax directive (Council Directive 2003/48/EC) is therefore aimed at enabling savings income in the form of interest payments made in one member state to individuals resident in another member state, subject to taxation. This includes interest payments made in European offshore jurisdictions and dependent territories such as British Virgin Islands, Cayman Islands, St Maarten, and Turks & Caicos.

There are 2 options under the directive.

1. Withholding Tax - Tax on any income paid on savings, fixed deposit, and interest bearing chequing accounts will be withheld from the account and forwarded to the competent authority in the account holder's country of residence. The tax will be levied at a rate of 15% during the first three years, 20% for the subsequent three years, and 35% thereafter.

OR

2. Sharing of Information - Details of interest or other income credited to an account, and any information regarding proceeds of sale, refund or redemption from investment instruments, will be provided to the competent authority in the account holder's country of residence. Personal identification information such as name, address, and account number will also be provided.

Any individual who is resident in a EU member state, and who receives an interest payment or for whom an interest payment is secured in another member state, offshore jurisdiction or dependent territory, will be subject to this directive.

This will include customers of CIBC Caribbean Bank Limited who are resident in a EU member state and have an interest bearing account in the British Virgin Islands, the Cayman Islands, St. Maarten or Turks & Caicos Islands. This includes individual or joint personal bank accounts, but does not include business or corporate accounts whose income is already subject to business taxation laws.

Depending on the legislation that each of the offshore jurisdictions and dependent territories put in place, customers affected by the directive will either have:

* The appropriate taxes withheld by the paying agent (in this case, the Bank) and transferred to the competent authority in the account holder's country of residence; or,
* Information about their savings income shared with the competent authority in the account holder's country of residence.

In St. Maarten, the legislation stipulates that taxes be withheld by the Bank, while in the Cayman Islands, the legislation stipulates that information on such income be shared with the appropriate authority.

According to the legislation in the British Virgin Islands, affected customers with accounts domiciled there will be given the choice of whether to have taxes withheld or the information shared. If they do not specify their preferred option, the Bank will withhold the taxes.

Turks and Caicos Islands are yet to confirm whether taxes are to be withheld by the Bank, or information shared with the appropriate authority.

EU Member States

Austria                              Estonia      Italy                     Romania

Belgium                            Finland      Latvia                   Slovakia
Bulgarian                         France        Lithuania            Slovenia
Croatia                             Germany    Luxembourg      Spain
Cyprus                             Greece        Malta                   Sweden
Czech Republic               Hungary      Poland               The Netherlands
Denmark                         Ireland         Portugal             United Kingdom

The dependent territories and offshore jurisdictions where CIBC Caribbean is currently operating are:

* British Virgin Islands
* Cayman Islands
* St. Maarten
* Turks & Caicos Islands

Tax will be calculated on income paid and will be withheld by the Bank in the territories where that option is employed as follows:

On income earned during the first three years (Jul 2005 - Jun 2008): 15%

On income earned during the subsequent three years (Jul 2008 - Jun 2011): 20%

On income earned thereafter: 35%

The information shared will be as follows:

* Identity and residence of the account holder(s)
* Name and address of the Bank
* Account number of the account holder or, where that is unavailable, the identification of the instrument on which an interest payment has been made;
* Information concerning the interest payment:

Amount of interest paid or credited to an account

Amount of interest or income paid OR the full amount of the proceeds from a sale, redemption or refund of investment instruments

The information will be shared with the competent authority in the member state where the account holder is resident for tax purposes. The competent authority includes any of the authorities notified by the member state to the European Commission, and would generally be the authority responsible for bilateral or multilateral tax conventions, or the authority responsible for issuing certificates of residence for tax purposes.

In the case of the Bank, the paying agent is the branch or unit of CIBC Caribbean where the account subject to interest payments is held.

An interest payment may be any of the following:

* Interest paid or credited to an account, such as a savings, fixed deposit or interest bearing chequing account;
* Interest accrued or capitalised at the sale, refund or redemption of investment instruments such as government securities, bonds or debentures;

If interest received by an account holder has been subject to withholding tax by the paying agent, the member state where that account holder is resident will grant him/her a tax credit equal to the amount of the tax withheld in accordance with the law in the member state.

An account holder may be exempt from this directive if they are acting on behalf of another individual who is the owner of the interest paid. The account holder must provide the Bank with the identity of that individual.

An account holder may also be exempt if he acts on behalf of a legal entity (such as a business / company / corporation), which is taxed on its profits under the arrangements for business taxation. The account holder must provide the Bank with the name and address of that legal entity. The Bank will, in turn, communicate such information to the competent authority of the member state in which the legal entity is registered or incorporated.

If an account holder can present the Bank with a certificate drawn up in his/her name by the competent authority of his member state of residence, he or she may be exempt from this directive.