‘FASTER’: EU Council of Ministers Adopts Directive to Harmonize Withholding Tax Procedures

On May 14, 2024, ECOFIN agreed on the Directive on Faster and Safer Relief of Excess Withholding Taxes (so-called FASTER Directive) after numerous adjustments to the EU Commission's proposal for a directive from June last year. The Directive aims to speed up and simplify withholding tax relief for investors, tax administrations, and financial intermediaries as well as improve possibilities for control and tracking for domestic tax authorities, particularly in cross-border cases.

The Directive is based on the following three key elements:

• The introduction of a digital EU residence certificate (eTRC) for private individuals and legal persons, which is issued by the member state of residence in an automated procedure within 14 calendar days following application.
• The introduction of two fast-track procedures for the relief of withholding taxes by way of either (1) a withholding tax relief and/or (2) a refund procedure. The member states are generally obliged to introduce one or both procedures in addition to the existing procedures.
• The introduction of a standardized reporting obligation for so-called financial intermediaries and their central recording in national registers. Financial intermediaries from third countries and smaller EU financial intermediaries can register voluntarily. In order to facilitate the registration process in the national registers, a superordinate European portal will be developed, which will also facilitate the exchange of information between the member states.

The member states are also obliged to impose effective, adequate, and dissuasive sanctions for infringements of the provisions of the Directive, whereby the concrete measures to be taken are left to the member states.

Once formally adopted by the EU Council of Ministers, the Directive can be published in the Official Journal of the EU and enter into force. The member states are obliged to implement the Directive into domestic law by December 31, 2028, with the regulations applying from January 1, 2030, onwards.

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