EU Council achieves agreement on harmonised withholding tax procedures across the EU
On 14 May 2024, after years of discussion, the EU Council reached a general agreement on its draft proposal of the Faster and Safer Relief of Excess Withholding Taxes directive. This proposal aims to establish faster and less burdensome withholding tax relief procedures. At the same time Member State authorities may exclude relief request from FASTER’s fast track procedure for further investigation, where deemed necessary to mitigate the risks of tax abusive.
This marks a significant step towards strengthening the capital markets union and combating tax fraud effectively. Key aspects include the following:
- FASTER initiative: This initiative aims to simplify withholding tax procedures either via relief at source or quick refund of excess withholding tax in the EU, benefiting investors, tax authorities, and financial intermediaries.
- Common Tax Residence Certificate: For these procedures to apply the directive contemplates introducing a common EU digital tax residence certificate (eTRC) to facilitate fast-track relief procedures for tax-paying investors.
- Fast-track procedures: Member states will implement two fast-track procedures: "relief-at-source" and "quick refund," – to expedite relief and refund processes.
- Options for Member States: Member States can maintain their current procedures under certain conditions, considering market capitalisation ratios and existing systems.
- Provisions for financial intermediaries: Financial intermediaries will have to register on newly established national registers (CFIs).
The identity of the competent authority that will become in charge of the proposal has not yet been determined and will be subject to a legislative procedure, requiring unanimity within the EU Council. The European Parliament will be consulted again on the agreed text. Once the directive is formally adopted by the EU Council and published in the EU’s Official Journal, Member States must transpose the directive into national legislation by 31 December 2028. National rules should become applicable from 1 January 2030.
EU Council’s press release can be accessed here.
Our previous blog post on this subject can be found here.
