EU Tightens Rules on Savings Taxation

Austria and Luxembourg have agreed to back EU plans to increase transparency in tax reporting at a summit in Brussels, Thursday.

The two countries had delayed endorsing EU reforms on the tax savings directive since 2008. The law requires all EU member states to exchange information on their citizens' accounts abroad, in order to easier find hidden funds and collect taxes on interest income.

The updated directive is set to be adopted next Monday, before it is transposed into national law over the next two years, the EUobserver reports.

"This is indispensable for enabling the member states to better clamp down on tax fraud and tax evasion," said European Council President Herman Van Rompuy in a statement following the adoption of the agreement.

The amendments to the savings tax directive are intended to prevent its circumvention, reflecting changes to savings products and developments in investor behavior.

Under current rules, member states do not exchange data on interest earned from financial products linked to investment funds, pensions, trusts or foundations.