ECSDA Responds to Faster and Safer Relief of Excess Withholding Taxes EC Consultation
On 18 September, The European Central Securities Depositories Association (ECSDA) welcomed the European Commission’s Proposal for a new EU system for the avoidance of double taxation and prevention of tax abuse in the field of withholding tax. We salute the intention of the proposal to simplify the procedures for claiming cross-border withholding tax relief and eliminate tax barriers.
We reiterate our support for the Directive and would like to express our commitment to continue engaging in further enhancements of the proposal. In the below brief response, our intention is to contribute to the concerns that require thoughtful consideration to foster a more streamlined,
efficient, and inclusive financial market. Further refinement is indispensable in our view to ensure that the proposal reaches its objective.
The tax barriers have been highlighted in a variety of post-trade industry reports as a major impediment to the proper functioning of the Capital Markets Union (CMU), the free movement of capital and the prevention of tax abuse faced by financial investors and intermediaries.
We particularly acknowledge the directive’s objective to build standardised digital tax residence certificates (eTRC), common reporting obligations, and standardised processes and timeframes for “at source’ and ‘quick refund’ procedures that are all aligned with ECSDA’s vision for a more
efficient, transparent, and user-friendly market.
For decades, the disparities in withholding tax procedures among the EU Member States have created significant barriers to cross-border capital flows, hindering, together with other inefficiencies, the creation of a truly integrated Capital Markets Union. By proposing a common framework to streamline and digitalise withholding tax procedures on cross-border investments, the FASTER directive attempts to address these barriers. In the digital age, transitioning from paper-based procedures to a more efficient and unified system is imperative. ECSDA is keen to support this transformative journey towards harmonisation leveraging on the expertise of its members in this field.
For this purpose, ECSDA has identified some aspects of the EC proposal requiring careful consideration to ensure that the FASTER directive effectively meets its objectives. In particular, we identified the following areas:
- Role of CSDs as CFI;
- Financial instruments in scope;
- Technical aspects related to relief at source and quick refund.