【KPMG's EU Tax Centre】Euro Tax Flash from EU Tax Centre

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Euro Tax Flash

from KPMG’s

EU Tax Centre

Council agrees on new rules for

harmonized withholding tax

procedures in the EU (

the FASTER

Directive

)

Issue

541

May 14, 2024

Key Summary:

The Council of the European Union reached agreement

(general approach) on the FASTER Directive proposal. Key

features of the proposal include:

- a common EU digital tax residence certificate, which will

comprise of common content, regardless of the issuing

Member State;

- two fast-track procedures complementing the existing

standard refund procedure in each Member State, including:

(i) a relief at source system, and (ii) a quick refund system. In-

scope Member States will be required to implement one of the

two systems (or a combination of both);

- the introduction of National Registers for financial

intermediaries that will be able to facilitate the fast-track

procedures. Such financial intermediaries will be subject to

additional due diligence and common reporting requirements.

Overview of our e-news

-News - KPMG Global

ETFs – Euro Tax Flash

Euro Tax Flash

- KPMG Global

Council of the EU – Fair taxation – Faster and Safer Relief of Excess Withholding Taxes –

FASTER – Withholding Taxes – Dividends – Interest

On May 14, 2024, the Economic and Financial Affairs Council of the EU (ECOFIN) reached agreement (general

approach) on the proposal for a “Faster and Safer Relief of Excess Withholding Taxes (FASTER)” Directive.

Formal adoption by the Council is expected once the European Parliament has given its opinion on the final

text. Member States have until the end of 2028 to transpose the Directive into domestic law, with the rules to

become applicable as of January 1, 2030.

The aim of the FASTER Directive is to make withholding tax (WHT) procedures in the EU more efficient and

secure for investors, financial intermediaries, and local tax authorities. The Directive gives in-scope Member

States a choice between implementing a quick refund system, a relief at source system or a combination of the

two, as well as the introduction of additional registration and reporting requirements for financial

intermediaries. The agreed text includes significant changes as compared to the initial proposal issued by the

European Commission (EC or Commission), as detailed below.

Background

On June 19, 2023, the EC issued a proposal for a Council Directive providing for “Faster and Safer Relief of

Excess Withholding Taxes (FASTER)”1.

The text of the FASTER proposal has been subject to lengthy discussions in the Council working groups.

Throughout 2023 and 2024, the Spanish and Belgian Presidencies of the Council consistently prioritized the file,

proposing multiple compromise texts.

In parallel, the European Parliament adopted on February 28, 2024, its non-binding opinion on the FASTER

proposal2, including several amendments to the text proposed by the EC. For more information on the

European Parliament opinion, please refer to E-News Issue 192.

Summary of key differences in comparison to the initial EC proposal

The agreed compromise text includes several amendments to the initial text proposed by the EC. Key

differences include:

-amendments to the rules in respect of issuance of the digital tax residence certificate (eTRC). The changes

include, amongst others: an increased deadline for Member States to issue the certificate (14 calendar

days as compared to one day in the initial proposal), a shorter validity of the eTRC (the maximum validity

period has been set as the calendar year, contrasting with the initial proposal where the calendar year was

the minimum validity period), and a requirement to include a reference to the applicable double tax

treaties;

-the possibility of maintaining Member States’ current systems of WHT relief, under specific conditions;

-in the context of the ‘quick refund’ procedure, longer deadlines for Member States to refund any overpaid

taxes (60 calendar days starting from the second month following the month of the payment as compared

to 50 calendar days in the initial proposal);

-significant revisions to the list of circumstances under which Member States may exempt requests for WHT

relief from the fast-track procedures. All circumstances are now discretionary, and the list has been

considerably expanded. Furthermore, the definition of the term 'financial arrangement' has been

enhanced with additional clarifications, and the recitals have been revised to incorporate a non-exhaustive

list of what may constitute a 'financial arrangement';

-the establishment of a European Certified Financial Intermediary Portal, aimed at serving as a single

electronic access point for financial intermediaries. Additionally, clarifications are provided regarding

1 For more information on the initiative, please refer to Euro Tax Flash Issue 517 and for the feedback provided by the KPMG

member firms in the EU please refer to Euro Tax Flash Issue 524.

2 Opinions adopted by the European Parliament under the special legislative procedure (which is the procedure applicable in the

case of the FASTER proposal) are not binding on the Council and European Commission, therefore the adoption of any of the

abovementioned changes requested or suggested by the European Parliament are at the discretion of the two institutions.

Agreement

(general approach)

on FASTER

Significant changes

to the initial

proposal

instances where Member States are permitted to reject registration or remove certified financial

intermediaries (CFIs) from National Registers;

-new provisions allowing CFIs to assume the position of non-certified intermediaries, to facilitate the

application of the relief and complete the information that must be reported to the tax authorities;

-amendments to the scope of information to be reported by CFIs and the due diligence procedures to be

conducted by them. Notably, CFIs are required to obtain a declaration that the investor is entitled to the

relief of withholding tax according to the legislation of the source Member State or a double tax treaty

and, when required by the source Member State, is the beneficial owner with respect to the dividend or

interest payment in accordance with the national legislation of the source Member State or a double tax

treaty as described by the Commentary on Article 10 or Article 11 of the OECD Tax Model Convention.

Source Member States therefore have the option to request the declaration on beneficial ownership, as

opposed to this declaration being mandatory in all cases. The simplified processes for small investors

(dividend payments below the EUR 1,000 threshold) – in terms of related verification and reporting

requirements to be conducted by CFIs, has been eliminated.

-new special provisions governing indirect investments;

-amendments to the provisions on late payment interest, liability, personal data protection and on

evaluation of the future Directive. Notably, revisions were made to the wording concerning the civil liability

of CFIs, with the aim to target CFIs that fail to fulfill their obligations under the FASTER Directive either

'completely or partially' (in contrast to the original wording of 'intentionally or negligently');

-the timeline for application of the new rules (initially set for January 1, 2027) has been postponed to

January 1, 2030.

Rules agreed by the Council

The FASTER Directive is structured into four Chapters that set out the rules, starting with general provisions on

scope and definitions, moving to the provisions relating to a digital tax residence certificate, the withholding

tax procedures and then finishing with provisions covering the transposition of the Directive into the local laws

of EU Member States.

The provisions of the FASTER Directive set out under Chapter I - General provisions, including the provisions

related to the eTRC, and Chapter IV – Penalties and final provisions will be mandatory for all Member States.

Scope

Under the compromise text, Chapter III of the FASTER Directive, which includes provisions regarding national

registers of CFIs and the fast-track procedures, amongst others, will not be binding on Member States that

meet the following two conditions:

-Comprehensive relief at source system (with regards to dividends from publicly traded shares) – in order

to be deemed comprehensive, a national relief at source system must meet specific criteria designed to

ensure the straightforward and efficient application of the appropriate tax rate at the time of payment. In

short, the criteria include:

-broad access to all individuals or companies entitled to the relief. According to the Recital to the

Directive, the system should apply for both direct and indirect investments;

-effectiveness, achieved by providing actual relief at the payment date, contingent upon the timely

reporting of all required information;

-no additional entry barriers with the exception of the anti-abuse provisions outlined by the

FASTER Directive;

-no additional information requested (as compared to that prescribed under FASTER), except for

circumstances falling under the anti-abuse provisions outlined in the Directive;

-existence of a liability framework for the loss of WHT revenue;

-penalties applicable to infringements of national provisions on that relief at source system.

-Low market capitalization – Member States are classified as such if their market capitalization ratio (a

percentage of the overall market capitalization of the EU) remains below 1.5 percent for at least four

consecutive years. Based on the Belgian Presidency explanatory note, the following 10 Member States had

Scope of the

Directive

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摘要：

EuroTaxFlashfromKPMG’sEUTaxCentreCouncilagreesonnewrulesforharmonizedwithholdingtaxproceduresintheEU(theFASTERDirective)Issue541May14,2024KeySummary:TheCounciloftheEuropeanUnionreachedagreement(generalapproach)ontheFASTERDirectiveproposal.Keyfeaturesoftheproposalinclude:-acommonEUdigitaltaxresidence...

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