The Council of the EU approved new withholding tax rules

The FASTER Directive introduces new procedures regarding withholding tax on dividends from publicly traded shares and interests from publicly traded bonds. These procedures will apply when the withholding tax rate in the source country differs from the tax rate which deriving under a relevant double taxation treaty. FASTER aims to reduce barriers to an effective capital markets union, improve cross-border investment and reduce potential tax fraud and abuse.

We have already informed you about the FASTER Directive proposal in our previous Article. Since then, the Directive has passed through the public consultation, consultation procedures with the European Parliament and the agreed compromise text includes key features for harmonized withholding tax procedures in the EU.

Digital tax residence certificate - Member States must issue digital tax residence certificates within 14 days of receiving a request.

The fast-track procedures – Member States will be required to implement, except for standard refund procedure for withholding taxes, two fast-track systems for applying the correct amount of withholding tax:

• a relief at source system - the application of the appropriate tax rate is applied directly at the time of payment of dividends or interest
• a quick refund system - reimbursement of overpaid withholding tax within a set deadline

Member States with comprehensive relief at source systems and low market capitalisation may decide to maintain their current procedures (not implement two fast-track withholding tax reclaim procedures).

New reporting obligations for financial intermediaries - the FASTER Directive introduces new reporting obligations for financial intermediaries in their national registers available on European Certified Financial Intermediary Portal.

The FASTER Directive will be published in the Official Journal of the EU once the legislative process is complete. Member states will have to implement it into domestic law by the end of 2028, with effect from 1 January 2030.

Our KPMG EU Tax Centre have prepared a more detailed information in Euro Tax Flash, which provides further context.