Date: 18th September 2023

BETTER FINANCE welcomes the European Commission’s WHT FASTER Proposal that has the potential to bring procedural progress in addressing longstanding obstacles to tax recovery for investors dealing with their cross-border investment income.

We applaud an EU-wide framework to streamline withholding tax (WHT) refund modalities under common reporting, and support its digitalisation addressing the current hurdle of tax residency verification via the introduction of a standardised ‘eTRC’ (E-tax residency certificate). However, it remains key to address potential exclusions, gaps and cost uncertainties to ensure that all retail investors benefit from their rights derived from securities’ ownership and to stimulate intra-EU investment. If the new quick refund system (QRS) and/or refeif at source procedure (RAS) can streamline WHT recovery, we caution against the modalities envisaged – notably on the current registration measures to certify financial intermediaries. Such measure may prove partial, and therefore restrictive and hamper concrete implementation of WHT reclaim to avoid double taxation. Moreover, nor does the proposal take sufficient account of the myriad of “standard” procedures that could remain a widespread fallback option for many investors, whereas cost and accessibility must be taken into account if WHT recovery is to become viable in the EU.

The FASTER proposal brings forth several key components that could change the game:

  • Standardised e-tax residence certificate (eTRC): Simplifying the documentation required for tax residence, making it more accessible and uniform.
  • Streamlined refund process: Making the refund process more efficient and less cumbersome, reducing administrative burdens.
  • Intermediary liability: Addressing issues related to intermediaries in the withholding tax refund process.

While these are promising steps, there are still crucial aspects that need our attention to make this proposal truly effective:

  • Ensuring intermediary certification at National Registers: Guaranteeing that intermediaries are properly registered and held accountable.
  • Enhancing the standard refund process: Continuously improving the efficiency and accessibility of the refund process.
  • Introducing a relief-at-source option for small shareholders: Simplifying the process further for individual investors.

The ultimate goal is to make tax recovery a right for all investors and to promote greater participation in the EU capital markets. By simplifying the withholding tax refund process, we can encourage more EU citizens to invest and actively contribute to the growth and development of the European economy.

—See our feedback paper below—