The republic of San Marino adopts its own independent tax policy and, as a non-EU country, it is not subject to the Community laws and regulations. An exception to this was the Agreement between the European Union and the Republic of San Marino that established measures which were equivalent to those of Directive 2003/48/EC of the Council on the taxation of savings income in the form of interest payments.
This agreement, entered into in Brussels on 7 December 2004, required San Marino to apply measures equivalent to those provided for in Directive no. 2003/48 as regards interest payments made by Paying Agents resident in the Republic of San Marino in favour of persons resident in a Member State of the EU. The same agreement was reached by the EU with other non-EU countries such as Switzerland, Liechtenstein, Andorra and Monaco.
Purpose of the aforementioned agreements was to ensure a fair competition regime between the countries of the European Union and some non-EU countries, geographically and economically interconnected with such EU countries, equivalent to the regime introduced with the directive 2003/48/EC. The agreement, in fact, entailed, for the EU residents who received payment in the form on interest from financial institutions of non-EU countries subscribers of the agreement:
Depending on the election made by the beneficiary of the payment, the tax administration of the EU country of residence received an information flow used for its check and monitoring activities for tax purposes, or, alternatively, a sort of compensation represented by the higher tax deduction paid to it by the tax administration of the paying entity.
The agreement dated 7 December 2004 was drastically altered by mean of an amending protocol effective as from 1 January 2016. This protocol introduced, between San Marino and the EU countries, a fixed form of automatic exchange of financial information based on the Global Standard defined by the OECD. With this new agreement, San Marino undertook to provide to the EU Member States the information related to the financial accounts open with the financial institutions of San Marino and held in the name of persons resident in such countries. Similarly, the EU Member States undertook to provide San Marino with information related to the financial accounts of persons resident in San Marino held with financial institutions incorporated in their jurisdiction.
The alterations introduced by the amending protocol are consistent with the commitments assumed at an international level by San Marino for the promotion of greater tax cooperation between the States through the instruments provided for in the Multilateral Convention of the OECD on Administrative Assistance (the so called Jakarta convention). San Marino and many other EU countries are in fact included in the list of the so called early adopters i.e the countries that, in October 2014, assumed the formal commitment to exchange the information automatically in accordance with the standard of the OECD (Common Reporting Standard).
By virtue of the entry into force of the amending protocol starting from 1 January 2016, San Marino ceased to apply the withholding tax provided for in the agreement dated 7 December 2004 on the income in the form of interest paid to residents in the EU.
During the years, the Central Bank supplied ongoing technical assistance to the Government of the Republic of San Marino both during the negotiations of the aforementioned agreements and during the phases for their implementation.
Amending protocol to the Agreement between the European Community and the Republic of San Marino providing for measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments