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05.02.2018 15:01 Age: 315 days
Category: Press Releases

Willingness of EU Member States Crucial for Ending Double Taxation of Investment Income within the EU

Guillaume Prache, Managing Director of BETTER FINANCE, was invited to address the European Commission’s (EC) ‘Public Hearing on a simpler Withholding Tax procedure for Europe’. The EC just released a Code of Conduct on withholding tax aimed at improving the refund and/or relief at source of current withholding taxes (WHT) charged by Member States within the European Union. At the hearing all participants, public and private, agreed that the success factor to transform this Code of Conduct into reality is the willingness of Member States to implement this non-binding document.

This is not a given, since those Member States currently avoid refunding or granting tax treaty relief at source for more than €6 billion per year according to the European Commission.

In support of the Capital Markets Union initiative, this new Code of Conduct aims to reduce the barriers hampering cross-border investments for (individual) investors by reducing the double taxation when the investor is taxed at the source of the dividend as well as at the destination (the investor’s country of residence). This double taxation arises for two main reasons:

  • the WHT is actually higher than the reduced WHT rate in the bilateral tax treaty (i.e. no actual relief at source), forcing the investor to try to get a refund for this excess tax from the originating Member State.
  • the Member State of residence does not allow the investor to deduct the WHT paid according to the tax treaty from the tax on his investment income. This is the case in Belgium where dividends sourced from other Member States are de facto taxed at a rate of 40.5% instead of 30% for Belgian-sourced dividends. The Code does unfortunately not address this serious issue.

Read the full press release here.


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