The FASTER Directive: a cross-border withholding tax relief system

The European Union has recently passed the FASTER Directive that aims to simplify and speed up the repayment of excess withholding tax (WHT) levied by some Member States on dividends paid to non-resident equity holders.

This legislation allows for the deduction of WHT at source and / or the faster repayment of withheld tax. It is predicated on key financial institutions’ increased involvement and introduces the Certified Financial Intermediary. The new law also requires Member States to establish systems to issue digital tax residence certificates, which will facilitate WHT repayments and could streamline other future cross-border tax issues.

The legislation is complex as it takes into account national specificities. This publication provides a flowchart of obligations and options affecting Member States.

Although the FASTER Directive has been approved by the European Council, it may be subject to a non-binding opinion from the European Parliament which can delay its adoption process.