What is the European Union Savings Directive (EUSD)
Please be aware that this Q & A document is intended only for private investors who hold certain Investec Global Strategy Funds directly with Investec Asset Management. If you hold any of the below mentioned investments via a fund platform or nominee company you will need to contact that company to discuss how the European Union Savings Directive affects your investments.
What is it?
The aim of the Directive, which was introduced on 01 July 2005, is to ensure that savings income, in the form of interest payments, payable to a European Union (EU) resident in an EU member state and certain other jurisdictions (see note below), are subject to effective taxation.
Whilst the main focus of the Directive was on bank interest certain investment funds, such as the Investec Global Strategy Fund (‘The Fund’), also fall into the Directive’s scope.
What is the current position for shareholders?
When the Fund was re-domiciled to Luxembourg on 1 July 2008 it became subject to the EUSD default position of Luxembourg which is withholding tax.
Luxembourg along with other EU member states (and certain other jurisdictions) were given the choice of either an exchange of information (the EU’s preferred option) or applying a withholding tax to those investment funds that fell within the scope of the Directive (see below for the list of in-scope Investec Global Strategy Fund sub-funds).
Luxembourg opted for the imposition of a withholding tax on income which was distributed by way of dividends and/or redemptions. This is therefore their default position, however shareholders could opt for the alternative of exchange of information, but only when the necessary form has been completed and submitted – see page 2 – can I opt for exchange of information instead?
Have all countries opted for this method?
NO: Most EU member states, including the UK, have opted for an exchange of information as standard, with the exception of Luxembourg, Austria and Belgium. In addition, Guernsey Jersey, Isle of Man and Switzerland, have opted to apply a withholding tax.
Which sub-funds are affected?
The following sub-funds are currently deemed in-scope for the purposes of the Directive, as they all have interest bearing investments which total over 40% of their net asset value (NAV):-
• Currency Alpha Fund
• Emerging Markets Currency Alpha Fund
• Emerging Markets Debt Fund
• Euro Money Fund
• Global Bond Fund
• Global Strategic Income Fund
• High Income Bond Fund
• Investment Grade Corporate Bond Fund
• Latin American Corporate Debt Fund
• Managed Currency Fund
• Sterling Money Fund
• US Dollar Money Fund
• Global Strategic Managed Fund (for distributions only until 1 January 2011*)
*from 1 January 2011, due to the entry level of interest bearing investments falling to 25%, it is anticipated that the Investec Global Strategic Managed Fund will become an in-scope fund for both distributions and redemptions.
IMPORTANT: Please note that equity funds are NOT deemed to be in-scope and therefore are exempt from the Directive.
How does it work?
If you are resident in the EU or certain other jurisdictions and invest in any of the above sub-funds you will receive interest (by way of distributions or redemptions). You may be liable to pay tax based on the amount of interest and/or redemption proceeds received. You have the option to authorise the paying agent to exchange information with your local tax authority, to avoid the possibility of having EUSD withholding tax deducted at source from payments due to you.
Withholding Tax
What is this tax?
It requires the Fund to deduct the appropriate level of tax directly from distributions and/or redemptions. The amount of tax deducted is shown on the dividend confirmation and/or the redemption (or switch out as any disposal is regarded as taxable) confirmation.
IMPORTANT: Withholding tax is ONLY applied to the interest portion of your investment income and therefore might only apply to part of your overall redemption proceeds as capital gains may have occurred.
What rate of tax will I pay?
Unless you have opted for exchange of information (or are exempt from the EUSD), your investment income will currently be subjected to a withholding tax of 20% which will be applied to any distribution payments and/or redemption proceeds you receive. This will rise to 35% from 1 July 2011.
Exchange of Information
What does it mean for me?
It requires the Fund to disclose information to the Luxembourg tax authority about the interest payments whether by way of distributions or redemptions. This information is then passed to the beneficial owner’s tax authority. This exchange of information occurs annually.
Is there any tax deducted and how does it work?
NO: If you have opted to disclose information then any interest payment will be paid to you free of withholding tax. Your local tax office will be informed of your investment income by the Luxembourg tax authorities and therefore it is important that your personal tax return reflects such payments.
How can I opt for exchange of information instead if I have not already done so?
If you wish to make the necessary information disclosure so that a withholding tax is not deducted, please either request the form from us or access our web site and download the form. Please complete and return the form to us. Contact details can be found at the end of this document.
IMPORTANT: We will need to have received from you all client identification documentation, as required under anti-money laundering regulations, prior to this exchange of information form being accepted.
I am exempt from paying tax, what do I need to do?
If you believe that you are not liable for such tax then you must be able to obtain an exemption certificate from your local tax authority. This must be forwarded to Investec at the address given below. The Directive will then not be applied to your investments provided the exemption form has been correctly authenticated.
Can I claim back tax that has already been deducted?
NO: Once the withholding tax has been deducted from an income payment/redemption, we are unable able to refund the tax amount to you. We are however able to provide you with a tax certificate, which you can then present to your local tax office. Your tax office will then be able to decide whether you are entitled to off-set the withholding tax paid against future income tax payable.
How are other Investec funds affected?
• UK onshore OEIC funds
Bond, money and balanced funds are all deemed to be in-scope. All equity based funds are out of scope. The UK has opted for full disclosure to the relevant tax authorities only.
• Dublin based Investec Liquidity Funds
These funds are all deemed in-scope. Ireland has opted for full disclosure to the relevant tax authorities only.
• All Guernsey domiciled funds
All Guernsey “B” domiciled funds are currently outside the scope of the Directive
This communication is provided for information purposes only and should not be construed as tax advice. All the information contained in this communication is believed to be reliable but may be inaccurate or incomplete. Please be aware that Investec Asset Management are not qualified tax experts so if you are unsure about your personal tax situation, you will need to contact your local tax office or a professional tax advisor.
How to contact us
If you need to speak to us about anything regarding this document, our office is open Monday to Friday 8.30am – 5.30 pm.
Telephone: + 44 (0) 20 7597 1800
Email: investor@investecmail.com
If you wish to download the exchange of information form please click below. If you need assistance please call the above number. Telephone calls may be recorded for training and quality assurance purposes.
Should you need to write to us – our address is:
Investec Global Strategy Fund – Global Distributor
Investec Asset Management Guernsey
PO Box 250
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 3QH
