On Monday 19 June, the European Commission proposed a new withholding tax procedure for cross-border income – dividends on shares and interest on bonds. Known as ‘FASTER’, this directive is designed to make these rules more effective and more secure for investors, financial intermediaries such as banks, and Member States’ tax authorities.
Like ‘BEFIT’ (see EUROPE 13190/30), it is a key element of the action plan for “business taxation fit for the 21st century”. It is also part of the Commission’s 2020 Action Plan on Capital Markets Union (see EUROPE 13172/8).
“We want to support the Single Market and make life easier for businesses, citizens and national authorities by securing a sound environment for investors, intermediaries and Member States’ tax administrations”, said Commissioner for Economy Paolo Gentiloni at a press conference.
“For far too long, cumbersome withholding tax procedures have discouraged cross-border investment and obstructed a well-functioning EU capital market”, he continued.
The Commission has estimated that accelerated procedures will save investors €5.17 billion a year. These standardised reporting obligations should also make it possible to combat tax fraud, particularly the type of fraud involved in the Cum-Ex and Cum-Cum scandals, which led to losses of €150 billion between 2000 and 2020 (see EUROPE 12665/24).
These procedures will be compulsory for large groups (around 200), while others will be able to choose to register.
The proposal has three parts. Firstly, the Commission wants to create a common digital tax residence certificate so that every country has access to the same content and data, using a harmonised standard. The certificate will be issued one day after the request: “It’s ambitious, because we want to push the timing further”, explained a European official.
Secondly, the proposal introduces common procedures, where each Member State will have the option of a faster procedure. “Some already offer it, but in a patchwork manner. There is no one solution, as this represents too much work for the Member States”, explained the official. “This provision will remain optional, depending on their risk appetite or the final tax rate already applied”, he stressed.
Thirdly, the Commission wants to build an infrastructure for investors who want a faster service. Only a certain number of banks will be able to offer this service. Investors will have to turn to certified financial intermediaries, who will be listed on registers kept by the Member States. Intermediaries may be removed if they do not behave properly.
The proposal also includes exemptions which are anti-abuse provisions. Finally, it includes penalties for late payment.
To read the proposal, go to https://aeur.eu/f/7le (Original version in French by Anne Damiani)