In a move aimed at facilitating cross-border investment and combating tax abuse, the Council of the European Union has reached an agreement on the general approach to safer and faster procedures for obtaining double taxation relief. The initiative, dubbed FASTER, seeks to streamline withholding tax procedures within the EU, benefiting cross-border investors, national tax authorities, and financial intermediaries.
“This agreement marks a pivotal step toward enhancing the efficiency of our tax relief procedures and fostering cross-border investment,” remarked the Belgian Minister of Finance. “By aligning our approaches, we not only bolster the functioning of the capital markets union but also enhance our ability to combat tax fraud effectively.”
Currently, the complexities of double taxation relief procedures vary significantly across EU member states, leading to lengthy, costly, and cumbersome processes vulnerable to tax fraud. The FASTER initiative aims to address these challenges by introducing faster, simpler, and safer tax relief procedures.
A key aspect of the directive is the introduction of a common EU digital tax residence certificate (eTRC), enabling tax-paying investors to benefit from expedited relief from withholding taxes. Member states will implement automated processes for issuing these certificates to residents for tax purposes.
The directive establishes two fast-track procedures alongside the existing standard refund process for withholding taxes:
- The “relief-at-source” procedure applies the relevant tax rate at the time of dividend or interest payment.
- The “quick refund” system grants reimbursement of overpaid withholding tax within a specified deadline.
Member states will be required to apply these fast-track procedures for excess withholding tax on dividends paid for publicly traded shares.
However, member states retain the option to maintain their current procedures, with certain conditions, or exclude requests from fast-track procedures for further checks to prevent fraud.
Additionally, the directive introduces standardized reporting obligations for financial intermediaries, such as banks and investment platforms, to aid in detecting potential tax fraud or abuse. A European Certified Financial Intermediary Portal will facilitate registration and reporting processes for these intermediaries.
Penalties will be imposed by member states for non-compliance with obligations stemming from the directive.
The proposal will undergo further consultations and legal checks before formal adoption by the Council. Member states are expected to transpose the directive into national legislation by December 31, 2028, with the rules becoming applicable from January 1, 2030.
