European Savings Tax

The method of tax avoidance, which was very common before the ESD is that money is simply held abroad to accumulate in foreign bank accounts. However, it is more than likely that this interest income was not declared in EU citizens' home countries, so it is actually tax evasion, not tax avoidance. The ESD changed it, but in most cases only for the money to be moved, not taxed.

The European Savings Tax Directive (ESD) is a "body blow" to some residents of the EU who have offshore bank accounts earning interest in other EU countries. This directive was first issued July 2005 and was a contract for the Member States to automatically exchange financial data on citizens from one Member State which has bank accounts in the country with the tax authorities of the country of citizenship with the account. That was confidential and could not provide EU citizens when they open accounts in foreign banks.

If the EU citizen is earning interest abroad and declaring their tax returns, it's very least HMRC was going to be asking for tax on interest plus penalties. The second and perhaps more serious problem that it took that and where the revenues are derived initially and had to have the original sales tax revenues in the first place?

At that time, 3 Member States decided to use an alternative system that has given the account holder's name, but only the withholding tax deducted at source and transfer it to a country where the account holder lived. This meant that anonymity is preserved for those EU citizens who are concerned to avoid paying taxes, but the benefits of having foreign bank accounts was understated. This withholding tax was increased in 2005 from 15% to 35%, a substantial amount of money on interest.

Analysis of countries that are selected for each method as follows:

The withholding tax option

Channel Islands
Isle of Man
Belgium
Luxembourg
Austria
British Virgin Islands
Turks and Caicos
Switzerland
Andorra
Monaco
Liechtenstein
San Marino
Information Sharing Option

Great Britain
Ireland
France
Germany
Italy
Spain
Portugal
Greece
Sweden
Finland
Denmark
Cyprus
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Malta
Poland
Slovakia and Slovenia
Anguilla
Cayman Islands
Montserrat
Avoiding ESD

With a bit of informed tax planning turned out not to be too hard to avoid ESD and some of the methods to achieve this are listed here.

Great Britain is not the place of residence

If you were not born in Britain but now lives there, you are classified as "non home". You May be a citizen of Great Britain or resident in the UK, but are not based in the UK, unless you decide to change. Those who are Non Doms are not taxed on their foreign income, unless they remit it back to the UK. This means that the tax on foreign bank accounts not paid. But since 2008 Finance Act, unless the House of abode in the UK 7 of the last 10 years, he or she must pay £ 30,000 pounds in tax that would be required remittance basis. This means that any foreign income over £ 100k is taxed as if they were returned back to the UK anyway.

Other Methods of Avoiding ESD

First, you can send your money in a country that is not covered by the ESD, such as Labuan, Panama, Hong Kong, Singapore, America, Bahamas, Bermuda, Antigua, St. Kitts and Nevis. Since the implementation of ESD has been a flood of money in Singapore and Hong Kong.

You can become a non-EU resident and invest your money wherever you want without the ESD is applied.

ESD applies only to individuals, not companies. So you can use offshore or even land a company to maintain your bank account. Common tax structure that is often used is to use an offshore trust or offshore ownership of offshore trust basis to maintain their accounts.

The ESD is valid only for interest payments. This was written to include all forms of debt claims. It would thus include government securities, bonds or debentures, accrued and capitalized interest. However, ESD does not apply to dividends from shares, or capital gains. This investment in shares abroad, unlike the money will fall outside the ESD. Bond investments with offshore insurance company, and fall outside the scope of ESD.
Therefore, ESD is really just about money than about one jurisdiction to another, although the tax authorities made some gains from the new law.