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Faster and Safer Relief of Excess Withholding Taxes

TA-9-2024-0102 · P9_TA(2024)0102 · PE752.746

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Written by a language model from the full text only; every figure comes from the text. The paragraph links open the paragraph a statement rests on — check the text itself before relying on it.

Parliament's amended version of the proposed directive on faster and safer relief of excess withholding taxes sets common rules for EU member states to simplify and speed up procedures for investors, while strengthening anti-fraud measures. It introduces a digital tax residence certificate (eTRC), a common framework for relief at source or quick refund, and due diligence obligations for certified financial intermediaries. It also requires monitoring and evaluation, including by EU bodies, and restricts data subject rights under certain conditions.

Key points

  1. Member states must issue an eTRC within three working days, extendable by up to five more, and recognise eTRCs from other member states as proof of residence.
  2. The eTRC must include the double tax treaty and, for entities, the European Unique Identifier where available; additional information for other purposes is deleted.
  3. Financial intermediaries must be registered within two months; rejections and removals must be communicated to other member states with reasons.
  4. Certified financial intermediaries must report information within 20 calendar days after the record date, or within 15 days if settlement is pending, and keep documentation for six years.
  5. Reporting and verification obligations are waived for dividends up to EUR 1500 per shareholding.
  6. Relief at source is denied if the share was acquired within five days before the ex-dividend date; member states' control powers are not limited.
  7. Certified financial intermediaries must obtain a declaration of beneficial ownership and verify risks, including residence and citizenship by investment schemes.
  8. Quick refund requests must be submitted within 25 days of payment; member states must process within 25 days or pay interest, unless they have reasonable doubts.
  9. Member states may reject refund requests if verification or audit is initiated.
  10. ESMA and EBA must monitor cum-ex and cum-cum risks; member states must coordinate with bodies like EPPO to prosecute illegal schemes.
  11. The Commission must evaluate the directive every five years, reporting by December 2031, and consider measures for retail investors, fee analysis, and further anti-fraud steps.
  12. Member states must provide statistical information to Parliament and the Commission for evaluation; data subject rights are restricted only when necessary and restored afterwards.

Who is affected

  • Retail investors: face particular challenges with withholding tax procedures; the directive aims to simplify relief for them.
  • Financial intermediaries: must register, report, and verify investors; may be liable for tax losses.
  • Member states: must implement eTRC, relief procedures, and monitoring; may restrict data rights.
  • Tax authorities: must issue eTRCs and process refunds within deadlines.

Figures and deadlines

  • EUR 55 billion estimated cost of cum-ex and cum-cum schemes between 2001 and 2012 in 11 member states.
  • EUR 141 billion estimated cost to 10 governments, including some member states.
  • EUR 1500 threshold for reduced verification and reporting obligations.
  • Three working days to issue eTRC, extendable by up to five working days.
  • Two months for registration of financial intermediaries.
  • 20 calendar days for reporting after record date; 15 days if settlement pending.
  • Six years for keeping documentation.
  • 25 calendar days for refund requests and processing.

Legal basis: Article 115 of the Treaty on the Functioning of the European Union