The European Parliament adopted by 555 votes to 48, with 42 abstentions, following a special legislative procedure (renewed consultation), a legislative resolution on the draft Council directive on Faster and Safer Relief of Excess Withholding Taxes.
Parliament approved the Council draft without amendments.
According to the Council draft, the directive will introduce a common EU digital tax residence certificate (eTRC) that tax paying investors would be able to use in order to benefit from the fast-track procedures to obtain relief from withholding taxes. Member States will provide an automated process to issue digital tax residence certificates (eTRC) to a natural person or entity deemed resident in their jurisdiction for tax purposes.
The directive allows Member States to have two fast-track procedures complementing the existing standard refund procedure for withholding taxes. Member States will have to use one or both of the following systems:
- a ‘relief-at-source’ procedure where the relevant tax rate is applied at the time of payment of dividends or interest;
- a ‘quick refund’ system where the reimbursement of overpaid withholding tax is granted within a set deadline.
The Council agreed that Member States must apply the fast-track procedures if they provide relief from excess withholding tax on dividends paid for publicly traded shares.
A key change is the exemption provided to Member States who already have a comprehensive relief-at-source system in place and who have a relatively small financial market, i.e. when their market capitalisation ratio is below a threshold of 1.5%.
The Directive further introduces a reporting obligation for financial intermediaries, who will have to register in national registers established pursuant to this Directive in order to be able to request the fast-track procedures. In order to simplify the procedure, a European Certified Financial Intermediary Portal will be created.
Lastly, the Council agreement extends the original deadline for the entry into force of 1 January 2027, as foreseen by the Commission’s proposal, to 1 January 2030.