Changes from report parliamentary committee draft to report parliamentary committee draft

EXPLANATORY STATEMENT

Change 4

RemovedYour rapporteur appreciates the efforts by the Commission to improve the patchwork of withholding tax procedures and to introduce a common EU-wide system for withholding tax on dividend or interest payments. The Commission proposal rightly respects the principles of simplification, subsidiarity and proportionality and suggests a system for tax authorities to exchange information and improve cooperation with each other.

AddedOn 28 July 2023, the Council consulted the Parliament on a proposal for a Council Directive on Faster and Safer Relief of Excess Withholding Taxes.

RemovedIn doing so, the Commission makes an effort to remove tax barriers to cross-border investments, bring down burdensome, costly and lengthy procedures and improve conditions to reduce the risks of tax fraud and abuse. With these suggestions, the Commission makes another step forward towards the completion of the Capital Markets Union. However, the success of FASTER depends on the commitment of Member States' they need to speed up efforts in providing digitalized, automated and better-coordinated key features.

AddedThe Parliament delivered its opinion on 28 February 2024.

RemovedYour rapporteur recognizes that this proposal is a first step towards making withholding tax claims more streamlined and efficient across the EU, however, sees room for improvement regarding the application of the advantages of the proposals towards investors and taxpayers, which should be further explored in a comprehensive review procedure. In particular regarding possible measures to facilitate self-processed withholding tax claims for small investors, a comprehensive analysis on the development of service fees charged by financial intermediaries, as well as an examination on the universal application of a relief at source system in all Member States. Furthermore, your rapporteur sees room for being more precise in the areas of clarifying the interaction between FASTER and the UNSHELL Directive, of better protecting personal data of tax payers, and of a coordinated understanding of "comparable legislation" when it comes to the registration of a third country financial intermediary.

AddedOn 14 May 2024, the Council reached a general approach on the draft Directive.

AddedHowever, given fundamental differences between the 19 June 2023 text of the Commission on which the Parliament was initially consulted and the text unanimously agreed in Council, the latter decided to re-consult the Parliament.

AddedAccording to the agreed text by the Council, the directive will introduce a common EU digital tax residence certificate (eTRC) and two fast-track procedures complementing the existing standard refund procedure for withholding taxes, as proposed by the Commission. However, the deadlines for the issuance of the eTRC and the quick refund system have been prolonged, making the tax relief ‘less fast’ than originally foreseen by the Commission’s proposal.

AddedA 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% (as reported by ESMA).

AddedThe 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. The Council agreed to create a European Certified Financial Intermediary Portal to simplify the procedure.

AddedFinally, 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.

AddedIn its letter requesting re-consultation, the Council is asking the Parliament to deliver its opinion as soon as possible and by 31 January 2024 at the latest. This is because Member States want to start working, together with tax authorities, the Commission and business stakeholders, on implementing acts. These implementing acts should, for instance, lay down standard computerised forms, including the linguistic arrangements, and technical protocols, including security standards, for the EU-wide eTRC.

AddedThe text agreed in the Council, although not fully in line with the EP opinion, still introduces a faster tax relief process compared to the current situation. The introduction of an electronic tax residency certificate (eTRC) was supported by the Parliament, Council, and the Commission.

AddedOverall, the deal struck by the Council is not only a step in the right direction towards facilitating cross-border investments and completing the Capital Markets Union (CMU). It also introduces some important measures to detect potential tax fraud or abuse in relation with withholding taxes.

AddedHowever, it is regrettable that the Council decided to postpone the entry into force until 2030, given the current importance of the completion of the CMU, as recently highlighted by the reports by Mario Draghi and Enrico Letta. In view of legal certainty and citizens’ interest to have a faster withholding tax refunding process, the Council should adopt quickly the COM(2023)0324 proposal on Faster and Safer Relief of Excess Withholding Taxes.

AddedTaking into account the time needed to transpose the Directive in Member States’ legislation and the political will to speed up its adoption, your rapporteur proposes that Parliament approves the proposal without amendments pursuant to a simplified procedure without amendments (rule 52).