Modernization and Digitalization of the EU Withholding Tax Procedure: Opportunities Offered by the FASTER Initiative

Abstract

The EU’s Faster and Safer Relief of Excess Withholding Taxes (FASTER) initiative aims to modernize and digitalize the withholding tax procedure. It addresses two key issues: preventing tax abuse and double taxation for cross-border investors. Cum/Ex and Cum/ Cum scandals exposed vulnerabilities in the current system, leading to substantial tax losses. To streamline the process, FASTER introduces a uniform EU Digital Tax Residence Certificate (eTRC), enabling digital reimbursement applications. It also offers two fast-track procedures, ‘relief at source’ and ‘quick refund’, alongside standard reporting obligations for certified financial intermediaries to enhance transparency. While the initiative promises annual savings of EUR 5.17 billion for investors, it places a significant burden on financial intermediaries. Implementing eTRCs and meeting reporting requirements involve substantial costs. Concerns regarding data protection and implementation timelines exist. The proposal is currently under public consultation until 21 August 2023, and the implementation is targeted for 1 January 2027, subject to further developments and consultations. In summary, FASTER seeks to modernize the withholding tax process to combat abuse and facilitate cross-border investments, but its impact on financial intermediaries and data protection considerations remain noteworthy. FASTER, Withholding tax, Digitalization, Tax fraud, Double taxation, eTRC, data protection, reporting obligation, national register, cum/ex