European Council Adopts Rules for Withholding Tax Procedures

On December 10, the European Council adopted new rules setting up safer and faster procedures to obtain double taxation relief that will encourage cross-border investment and help fight tax fraud.

The FASTER directive aims to make withholding tax procedures in the EU safer and more efficient for cross-border investors, national tax authorities and financial intermediaries, such as banks or investment platforms.

The directive will introduce a common EU digital tax residence certificate (eTRC) that tax paying investors would be able to use in order to benefit from the fast-track procedures to obtain relief from withholding taxes.

Member states will provide an automated process to issue digital tax residence certificates (eTRC) to a natural person or entity deemed resident in their jurisdiction for tax purposes.

Member states will use one or both of the following systems:

– a “relief-at-source” procedure where the relevant tax rate is applied at the time of payment of dividends or interest;

–  a “quick refund” system where the reimbursement of overpaid withholding tax is granted within a set deadline.

Member states will have to transpose the directive into national legislation by December 31, 2028, and the national rules will have to apply from January 1, 2030.

Press release