BCL Circular 2005/190 of 11 July 2005 — Balance of Payments Data Collection: Taxation of Savings Income in the Form of Interest Payments

Luxembourg, 11 July 2005

To all credit institutions and to the financial services of the Post and Telecommunications Company (postal checking account service)

BCL CIRCULAR 2005/190

Balance of Payments Data Collection: Taxation of Savings Income in the Form of Interest Payments.

Special Treatment in the Balance of Payments

Ladies and Gentlemen,

We have the honour to refer to Circular 2001/166 regarding instructions concerning modifications to data collection for the establishment of the balance of payments.

This circular falls within the framework of the introduction of withholding tax as provided for by the law of 21 June 2005 transposing into Luxembourg law Directive 2003/48/EC of 3 June 2003 of the European Union on the taxation of savings income in the form of interest payments. Its objective is to clarify the procedures for recording transactions related to withholding tax at the level of the balance of payments registry.

The following lines clarify the instructions for recording the withholding tax levied by the paying agent during the payment of interest to the beneficial owner in the balance of payments registry.

The terms "interest payment", "beneficial owner" and "paying agent" are understood according to the provisions set out in Articles 2, 4 and 6 of the aforementioned law.

The gross amount of interest as well as the amount of tax must be recorded in the registry.

The withholding tax must be classified under a new operation code with the credit institution as the resident counterparty.

The new operation code to be applied is as follows:

Label
386 Withholding tax levied by the paying agent during the payment of interest to the non-resident beneficial owner

Operation code 386 is used with the credit institution as the resident counterparty and the transactions must be reported from the first euro (or in equivalent foreign currency). A monthly aggregation of the transactions to be reported under operation code 386 may be carried out, at the choice of the credit institution, in line with the procedures provided for in point 1.8 of the annex to Circular 2001/166.

In the case where the currency of the interest payment is not the euro, the withholding tax levied by the paying agent may be recorded in the registry, at the choice of the credit institution, either in the original currency or in euros.

Periodic transfers between the credit institution and the Luxembourg administration must not be recorded in the registry, as these are transactions between two resident entities.

Example of individual recording.

A resident credit institution credits the current account of a resident client in Germany with a gross interest payment of 1,000 euros. This interest payment is linked to a deposit made with this establishment by the non-resident client. In the case where these interests would be subject to taxation under the aforementioned law, the credit institution must record the following transactions in the registry:

The credit institution	The credit institution
pays the funds into the	withholds the tax from the
account of the beneficiary	account of the beneficiary
client	client
Operation Code 303	386
Identifier of the	N° BCL of the credit	N° BCL of the credit
resident counterparty	institution	institution
Country of the non-resident	DE	DE
counterparty
Currency	EUR	EUR
Debit / Credit Indicator	C	D
Amount	1,000	150

Given these new provisions, we have the honour to transmit to you a revised version of the Collection of Instructions for Credit Institutions and Financial Services of the Post and Telecommunications Company (postal checking account service) for the purpose of statistical data collection for the compilation of the Luxembourg balance of payments, which is attached to Circular 2001/166.

The modifications notably include the introduction of operation code 386 in the tables found on pages 12 and 71 of the Instructions Collection, as well as the update of annexes 3 and 5 relating to the lists of country codes and currency codes (new Turkish lira and new Romanian leu).

The use of the new operation code is mandatory upon receipt of this circular.

For any information regarding the application of these instructions, Mr. Philippe Arondel (tel. 4774 4269) and/or Mr. Germain Stammet (tel. 4774 4279) are at your disposal.

Please accept, Ladies and Gentlemen, the assurance of our very distinguished sentiments.

CENTRAL BANK OF LUXEMBOURG

The Directorate

Serge KOLB Andrée BILLON Yves MERSCH

Annex: 1