Legal provisions of COM(2023)324 - Faster and Safer Relief of Excess Withholding Taxes - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2023)324 - Faster and Safer Relief of Excess Withholding Taxes. |
|---|---|
| document | COM(2023)324 |
| date | June 19, 2023 |
CHAPTER I
GENERAL PROVISIONS
Article 1
Subject matter
This Directive lays down rules on the issuance of a digital tax residence certificate by Member States and the procedure to relieve any excess withholding tax that can be withheld by a Member State on dividends from publicly traded shares and, where applicable, interest from publicly traded bonds paid to registered owners who are resident for tax purposes outside that Member State.
Article 2
Scope
Chapters I and IV shall apply to all Member States. Chapter II shall apply to all Member States with regards to all persons that are resident for tax purposes in their jurisdiction.
The procedures laid down in Chapter III shall apply to all Member States that provide relief of excess withholding tax on dividends paid for publicly traded shares. Member States that provide relief of excess withholding tax on interest paid for publicly traded bonds may apply Chapter III.
Article 3
Definitions
For the purposes of this Directive the following definitions shall apply:
(1) ‘excess withholding tax’ means the difference between the amount of withholding tax levied by a Member State on payments to non-resident owners of dividends or interest from securities by applying the general domestic rate and the lower amount of withholding tax applicable by that Member State on the same dividends or interest in line with a double tax treaty or specific national legislation, as the case may be.
(2) ‘publicly traded share’ means share admitted to trading on a regulated market or multilateral trading facility as defined under points 21 and 22 of Article 4 of Directive 2014/65/EU of 15 May 201433.
(3) ‘publicly traded bond’ means a bond admitted to trading on a regulated market or multilateral trading facility or organised trading facility as defined under points 21, 22 and 23 of Article 4 of Directive 2014/65/EU of 15 May 2014 respectively.
(4) ‘financial intermediary’ means a central securities depository as defined in Article 2 (1) of Regulation (EU) 909/2014 of 23 July 201434, a credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/201335 or an investment firm, as defined in point (1) of Article 4(1) in Directive 2014/65/EU or a third country legal person that has been authorised to provide services comparable to those provided by a central securities depository, a credit institution or an investment firm under comparable legislation of a third country of residence, which is part of the securities payment chain between the entity issuing securities and the registered owner receiving payments on such securities.
(5) ‘EUID’ means the European Unique Identifier for companies as referred to in Article 16 of Directive (EU) 2017/1132 of the European Parliament and of the Council 36.
(6) ‘tax identification number or TIN’ means the unique identifier for tax purposes of a registered owner as such in a Member State.
(7) ‘withholding tax relief procedure’ means a procedure whereby a registered owner receiving dividends or interest from securities that can be subject to excess withholding tax is relieved or reimbursed for such excess tax.
(8) ‘competent authority’ means the authority which has been designated by a Member State in accordance with Article 5 and includes any person authorised in accordance with national rules by such authority to act on its behalf for the purposes of this Directive.
(9) ‘security’ means a publicly traded share or a publicly traded bond.
(10) ‘large institution’ means a large institution as defined in point (146) of Article 4(1) of Regulation (EU) No 575/2013.
(11) ‘withholding tax agent’ means an entity authorised by the source Member State to assume responsibility for the deduction of withholding tax from payment of dividends or interest from securities and the transfer of such withholding tax to the tax authority of the source Member State.
(12) ‘record date’ means the date set by the issuer of a security, on which the identity of the holder of such security and the rights flowing therefrom, including the right to participate and vote in a general meeting, where relevant, shall be determined, based on the settled positions struck in the books of the financial intermediary by book-entry at the close of its business as defined in Article 1 (7) of Regulation 2018/121237.
(13) ‘settlement’ means the completion of a securities transaction where it is concluded with the aim of discharging the obligation of the parties to that transaction through the transfer of cash or securities or both, as defined in point 7 of Article 2 of the Regulation (EU) 909/2014 of 23 July 2014.
(14) ‘registered owner’ means any natural or legal person that is entitled to receive dividend or interest income from securities subject to tax withheld at source in a Member State.
(15) ‘investment account’ means the account or accounts provided by financial intermediaries to registered owners via which their securities are held or registered and to which the payments related to these securities are made.
(16) ‘ex-dividend date’ means the date as from which the shares are traded without the rights flowing from the shares, including the right to participate and vote in a general meeting, where relevant.
(17) ‘financial arrangement’ means any arrangement or contractual obligation whereby any part of the ownership of the publicly traded share, on which a dividend is paid, is or could be, either permanently or temporarily transferred to another party.
(18) ‘securities payment chain’ means the sequence of financial intermediaries handling the payment of dividends or interest on securities between the securities’ issuer and a registered owner to whom dividends or interest from such securities are paid.
(19) ‘double tax treaty’ means an agreement or convention that provides for the elimination of double taxation of income, and where applicable, capital, in force between two (or more) countries.
(20) ‘source Member State’ means the Member State of residence of the issuer of the security paying dividend or interest.
(21) ‘quick refund system’ means a system where a payment of dividend or interest is made taking into account the general domestic withholding tax rate followed by a request for refund of the excess withholding tax within the timeframe set in Article 13.
(22) ‘relief at source system’ means a system where the appropriate withholding tax rate, in accordance with the applicable domestic rules and/or international agreements, such as the relevant double tax treaty, is applied at the moment of payment of dividends or interest.
(23) ‘standard refund system’ means a system where a payment of dividends or interest is made taking into account the general domestic withholding tax rate followed by a request for refund of the excess withholding tax outside the procedure set out in Article 13.
(24) ‘euro short-term rate’ means the euro short-term rate as defined in Guideline (EU) 2019/1265 of the European Central Bank of 10 July 201938.
CHAPTER II
DIGITAL TAX RESIDENCE CERTIFICATE
Article 4
Digital tax residence certificate (eTRC)
1. Member States shall provide for an automated process to issue digital tax residence certificates (eTRC) to a person deemed resident in their jurisdiction for tax purposes.
2. Member States shall issue the eTRC within one working day from submission of a request, subject to paragraph 4. The eTRC shall comply with the technical requirements of Annex I and shall include the following information:
(a) the first and last name of the taxpayer and the date and place of birth, if the taxpayer is an individual, or its name and its European Unique Identifier number (EUID), if the taxpayer is an entity
(b) tax identification number;
(c) address of the taxpayer;
(d) date of issuance;
(e) the covered period;
(f) identification of the tax authority issuing the certificate;
(g) any additional information that may be relevant where the certificate is issued to serve purposes other than relief of withholding tax under this Directive or information required to be included in a tax residence certificate under EU law.
3. An eTRC shall cover at least the whole calendar year in which the request for such certificate is made and shall be valid for such covered period unless and until the Member State issuing the eTRC has evidence that the person to which the eTRC refers is not resident in its jurisdiction.
4. If more than one working day is required to verify the tax residency of a specific taxpayer, the Member State shall inform the person requesting the certificate of the additional time needed and the reasons for the delay.
5. Member States shall recognise an eTRC issued by another Member State as adequate proof of residence of a taxpayer in that other Member State in accordance with paragraph 3.
6. The Commission shall adopt implementing acts laying down standard computerised forms, including the linguistic arrangements, and technical protocols, including security standards, for the issuance of an eTRC. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 18.
CHAPTER III
WITHHOLDING TAX RELIEF PROCEDURE
SECTION 1
CERTIFIED FINANCIAL INTERMEDIARIES
Article 5
National register of certified financial intermediaries
1. Member States that levy a withholding tax on dividends from publicly traded shares paid to registered owners resident for tax purposes outside that Member State and that provide relief of excess withholding tax shall establish a national register of certified financial intermediaries. Member States may opt to use this national register also in relation to relief of excess withholding tax on interest from publicly traded bonds, if applicable.
2. Member States that levy a withholding tax on interest from publicly traded bonds while they do not levy withholding tax on dividends from publicly traded shares may opt to establish a national register.
3. Member States establishing a national register according to paragraph 1 and 2 shall designate a competent authority responsible for maintaining and updating that register.
4. The national register shall include the following information on the certified financial intermediaries:
(a) name of the certified financial intermediary;
(b) date of registration;
(c) contact details and any existing website of the certified financial intermediary;
(d) the EUID, or, where the certified financial intermediary has no such number, the legal entity identifier (LEI) or any legal entity registration number issued by its country of residence.
5. The national register shall be made publicly accessible on a dedicated website of the Member State and updated at least once a month.
Article 6
Requirement to register as certified financial intermediary
1. Member States that maintain a national register according to Article 5 shall require all large institutions as referred to in Article 3(10) that handle payments of dividends and, where relevant, interest on securities originating in their jurisdictions, and central securities depositories as referred to in Article 3(4) that provide withholding tax agent services for the same payments, to register with their national register.
2. Member States maintaining a national register in accordance with Article 5 shall enable, upon request, the registration in that register of any financial intermediary meeting the requirements of Article 7.
Article 7
Registration procedure
1. Member States shall ensure that a financial intermediary is registered in their national register of certified financial intermediaries within three months from submission of a request of the financial intermediary that provides evidence of all of the following requirements:
(a) a residence for tax purposes in a Member State or third country jurisdiction not included on Annex I of the EU list of non-cooperative jurisdictions for tax purposes39 nor on the table I of the Annex to Delegated Regulation (EU) 2016/167540;
(b) if the requesting financial intermediary is a credit institution, an authorisation in the jurisdiction of residence for tax purposes to perform custodial activities under points (12) or (14) of Annex I of Directive 2013/36/EU or comparable legislation of a third country; if the requesting financial intermediary is an investment firm, an authorisation in the jurisdiction of residence for tax purposes to perform custodial activities under Section B(1) of Annex I of Directive 2014/65/EU or comparable legislation of a third country or; if the requesting financial intermediary is a central securities depository, an authorisation in the jurisdiction of residence for tax purposes under Regulation EU 909/2014 or comparable legislation of a third country of residence;
(c) a declaration of compliance with the provisions of Council Directive 2014/107/EU41 or the provisions of Directive 2018/843/EU of the European Parliament and of the Council42 as applicable or with a comparable legislation of a third country jurisdiction not included on Annex I of the EU list of non-cooperative jurisdictions for tax purposes or on the table I of the Annex to Delegated Regulation (EU) 2016/1675.
2. Financial intermediaries shall notify without delay the competent authority of the Member State of any change in the information provided under points (a) to (c).
Article 8
Removal from the national register
1. Member States shall remove from their national register any certified financial intermediary, where such intermediary:
(a) requests such removal; or
(b) no longer meets the requirements of Article 7.
2. Member States may remove from their national register any certified financial intermediary that has been found to have repeatedly and intentionally not complied with its obligations under any of the following instruments:
(a) this Directive;
(b) Council Directive 2014/107/EU; or
(c) Directive 2018/843/EU; or
(d) comparable legislation of a third country of residence for tax purposes.
3. The Member State that removes a certified financial intermediary from its national register shall inform without delay all other Member States that maintain a national register according to Article 5.
4. Member States shall ensure that the financial intermediary that has been removed from the national register pursuant to paragraph 1 is re-registered where any non-compliance with the provisions of this Directive has been remedied, including payment or settlement of any amounts outstanding due to non-compliance therewith.
SECTION 2
REPORTING
Article 9
Obligation to report
1. Member States shall take the necessary measures to require certified financial intermediaries in their national register to report to the competent authority the information referred to in Annex II as soon as possible after the record date, unless a settlement instruction in respect of any part of a transaction is pending on the record date, in which case the reporting for that transaction shall take place as soon as possible after the settlement. If 20 days after the record date, settlement is still pending for any part of the transaction, certified financial intermediaries shall report within the next 5 calendar days indicating the part for which settlement is pending.
2. Member States shall provide that certified financial intermediaries do not need to report information referred to in Annex II, heading E, if the total dividend paid to the registered owner on the owner’s shareholding in a company does not exceed EUR 1000.
3. Member States that opt to use a national register established in accordance with Article 5 in relation to payments of interest, shall require certified financial intermediaries to report the information included in Annex II but shall not require reporting of information under heading E.
4. The Commission shall adopt implementing acts laying down standard computerised forms, including the linguistic arrangements, and requirements for the communication channels, for the reporting of information referred to in Annex II. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 18.
5. Member States shall require certified financial intermediaries in their national register to keep the documentation supporting the information reported for five years and to provide access to any other information, as well as access to their premises for the purpose of audit and shall require certified financial intermediaries to delete or anonymise any personal data included in such documentation as soon as the audit has been completed and at the latest five years after reporting.
SECTION 3
SYSTEMS OF RELIEF
Article 10
Request for relief at source or quick refund
1. Member States shall require a certified financial intermediary maintaining the investment account of a registered owner receiving dividends or interest to request relief pursuant to Article 12 and/or Article 13, on behalf of such registered owner, if the following conditions are met:
(a) The registered owner has authorised the certified financial intermediary to request relief on its behalf; and
(b) The certified financial intermediary has verified and established the registered owner’s eligibility in accordance with Article 11. Such verification may also include a risk assessment that takes into account the credit risk and fraud risk.
2. Notwithstanding paragraph 1, Member States shall not provide relief under the systems as provided for under Articles 12 and 13 for a request, where:
(a) the dividend has been paid on a publicly traded share that the registered owner acquired within a period of two days before the ex-dividend date;
(b) the dividend payment on the underlying security for which relief is requested is linked to a financial arrangement that has not been settled, expired or otherwise terminated at the ex-dividend date.
3. Notwithstanding paragraph 1, Member States may exclude requests from relief under Articles 12 and 13, where:
(a) at least one of the financial intermediaries in the securities payment chain is not a certified financial intermediary and a subsequent certified financial intermediary in the chain has not provided to the competent authority the information that the financial intermediary should report under this Directive if it were a certified financial intermediary; or
(b) an exemption of the withholding tax is claimed.
Article 11
Due diligence of registered owner’s eligibility
1. Member States shall ensure that the certified financial intermediary requesting relief under Article 12 and/or 13 on behalf of a registered owner obtains from such registered owner a declaration that the registered owner:
(a) is the beneficial owner of the dividend or interest as defined under the national legislation of the source Member State; and
(b) has not engaged in a financial arrangement linked to the underlying publicly traded share that has not been settled, expired or otherwise terminated at the ex-dividend date.
2. Member States shall ensure certified financial intermediaries requesting relief under Article 12 and/or 13 on behalf of a registered owner to verify:
(a) the eTRC of the registered owner and/or appropriate proof of tax residence in a third country;
(b) the registered owner’s declaration and tax residence against information from the internal control mechanisms used by the certified financial intermediary in order to comply with the obligations in relation to money laundering and terrorist financing under Directive (EU) 2015/84943 or comparable information required in third countries;
(c) the registered owner’s entitlement to a specific reduced withholding tax rate in accordance with a double tax treaty between the source Member State and the jurisdictions where the registered owner is resident for tax purposes or specific national legislation of the source Member State;
(d) in case of a dividend payment and based on the information available to the certified financial intermediary, the possible existence of any financial arrangement that has not been settled, expired or otherwise terminated at the ex-dividend date, unless the dividend paid to the registered owner for each group of identical shares held does not exceed EUR 1000.
3. Member States shall ensure that certified financial intermediaries have adequate procedures in place to perform verifications in accordance with paragraph 2.
Article 12
Relief at source system
Member States may allow certified financial intermediaries maintaining a registered owner’s investment account to request relief at source on behalf of a registered owner in accordance with Article 10 by providing to the withholding tax agent the following information:
(a) the tax residence of the registered owner; and
(b) the applicable withholding tax rate on the payment in accordance with a double tax treaty or specific national legislation.
Article 13
Quick refund system
1. Member States may allow certified financial intermediaries maintaining a registered owner’s investment account to request a quick refund of the excess withholding tax, on behalf of such registered owner in accordance with Article 10 if the information referred to in paragraph 3 of this Article is provided as soon as possible after the payment date and at the latest within 25 calendar days from the date of payment of the dividend or interest.
2. Member States shall process a refund request made in accordance with paragraph 1 within 25 calendar days from the date of such request or from the date reporting obligations under this Directive have been met by all relevant certified financial intermediaries, whichever is the latest. Member States shall apply interest in accordance with Article 14 on the amount of such refund for each day of delay after the 25th day.
3. A certified financial intermediary requesting quick refund shall provide the following information to the relevant Member State:
(a) identification of the dividend or interest payment as referred to in Annex II, heading B;
(b) the legal basis of the applicable withholding tax rate and total amount of excess tax to be refunded;
(c) the tax residence of the registered owner;
(d) the registered owner’s declaration in accordance with Article 11.
4. The Commission shall adopt implementing acts laying down standard computerised forms, including the linguistic arrangements, and requirements for the communication channels for the submission of requests under this Article. Those implementing acts shall be adopted, in accordance with the examination procedure referred to in Article 18.
Article 14
Late payment interest
Member States shall apply interest in accordance with Article 13(2) at a rate equal to the interest or equivalent charge applied by the Member State to late payments of income tax by registered owners, or, if the national legislation of the Member States does not include such provision, at the Euro short-term rate plus 50 basis points or the equivalent interest rate used by their Central Bank plus 50 basis points, if they are not part of the European Exchange Rate Mechanism.
Article 15
Standard refund system
Member States shall adopt appropriate measures to ensure that where Article 12 and Article 13 do not apply to dividends, because the conditions of this Directive are not met, a registered owner or its authorised representative requesting for refund of the excess withholding tax on such dividends provides at least the information required under Annex II, heading E, unless the total dividend paid to the registered owner on the owner’s shareholding in a company does not exceed EUR 1000, and unless this information has already been provided in accordance with the obligations of Article 9.
Article 16
Civil liability
Member States shall take appropriate measures to ensure that if a certified financial intermediary does not comply, intentionally or negligently, with its obligations under Articles 9, 10, 11, 12 and 13, the certified financial intermediary can be held liable for all or part of the loss of withholding tax revenue incurred by the Member State in relation to a request under Article 12 or 13.
Article 17
Penalties
Member States shall lay down the rules on penalties applicable to infringements of national provisions adopted pursuant to this Directive, and shall take all measures necessary to ensure that they are implemented. These penalties shall be effective, proportionate and dissuasive.
CHAPTER IV
FINAL PROVISIONS
Article 18
Committee procedure
1. The Commission shall be assisted by a Committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/201144.
2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.
Article 19
Evaluation
1. The Commission shall examine and evaluate the functioning of this Directive, after national rules transposing the Directive come into effect, every 5 years. A report on the evaluation of the Directive, including on a potential need to amend specific provisions thereof, will be submitted to the European Parliament and the Council by December 2031 and every 5 years.
2. Member States shall communicate to the Commission relevant information for the evaluation of the Directive in improving withholding tax relief procedures to reduce double taxation as well as combat tax abuse, in accordance with paragraph 3.
3. The Commission shall, by means of implementing acts, specify the information to be provided by Member States for the purposes of evaluation and the format and the conditions of communication of that information.
4. Information communicated to the Commission under paragraph 2 shall be kept confidential by the Commission in accordance with the provisions applicable to Union institutions.
5. Information communicated to the Commission by a Member State under paragraph 2, as well as any report or document produced by the Commission using such information, may be transmitted to other Member States. The transmitted information shall be covered by the obligation of official secrecy and enjoy the protection extended to similar information under the national law of the Member State which received it.
Article 20
Personal data protection
1. Member States shall restrict data subject’s rights under Articles 15 to 19 of Regulation (EU) 2016/679 of the European Parliament and of the Council45 only to the extent and only as long as it is strictly necessary for their competent authorities to mitigate the risk of tax fraud, evasion or avoidance in Member States, in particular by verifying that the correct withholding tax rate is applied for the registered owner, or by verifying that the registered owner obtains the relief if so entitled in a timely manner.
2. When processing personal data, certified financial intermediaries and the competent authorities of Member States shall be considered as controllers, in the meaning of Article 4, paragraph 7 of Regulation (EU) 2016/679, within the scope of their respective activities under this Directive.
3. Information, including personal data, processed in accordance with this Directive shall be retained only as long as necessary to achieve the purposes of this Directive, in accordance with each data controller’s domestic rules on statute of limitations, but in any case no longer than 10 years.
Article 21
Notification
A Member State that establishes and maintains a national register pursuant to Article 5, shall inform the Commission and other Member States thereof and of any subsequent changes to the rules governing such register. The Commission shall publish in the Official Journal of the European Union this information and shall update the information as necessary.
Article 22
Transposition
1. Member States shall adopt and publish, by 31 December 2026 at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.
They shall apply those provisions from 1 January 2027.
When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.
2. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.
Article 23
Entry into force
This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Article 24
Addressees
This Directive is addressed to the Member States.