FASTER – Faster and safer tax excess refunds [EU Legislation in Progress]

Written by Pieter Baert (1st edition).

When an EU resident makes an investment in securities in another Member State, the payments received in return (dividends or interest) are normally subject to a withholding tax in the country of the investment (source country), before being subject to tax in the resident’s country. In order to eliminate double taxation, the investor has to submit a refund claim on the excess tax withheld by the source country. Today, however, these relief procedures are cumbersome, unharmonised, and often paper-based. This discourages investors from making investments in another EU Member State, to the detriment of capital markets union and growth of EU businesses. The system also leaves room for fraudsters to claim refunds on taxes they never paid in the first place.

To address this issue, the European Commission tabled the FASTER proposal on 19 June 2023. Under the proposal, Member States would be given a choice between applying either a ‘relief at source’ system and/or a ‘quick refund’ system, with both procedures accelerating and facilitating withholding tax relief for the investor, thereby promoting cross-border investment in the EU. In addition, a number of safeguards to stop tax abuse, in particular cum-ex fraud, are introduced.

The proposal is subject to the special legislative procedure, requiring unanimous support in Council, following consultation of the European Parliament and the European Economic and Social Committee.

Versions

• August 2023: FASTER – Faster and safer tax excess refunds (1st edition)