The European Commission on Monday presented a number of measures designed to make it easier for investors active in several Member States to get refunds if subjected to double taxation.
The current procedures for refunding excess tax paid in another Member State are governed by so-called double taxation treaties. These procedures are, however, disparate, costly and cumbersome. They stifle investment throughout the single market, according to Financial Services Commissioner Mairead McGuinness.
Retail investors are the hardest hit, as 70% of them do not claim the tax refund to which they are entitled, she notes.
The EU executive is proposing to create a common EU digital tax residence certificate. Investors with a diversified portfolio across the Union will only need one such document to claim multiple refunds in a single calendar year.
Two new refund procedures would be introduced. Under the first, known as ‘relief at source,’ the tax rate applied when dividends or interest are paid will be based directly on the applicable rules set out in the double taxation treaty provisions.
For the other, known as ‘prompt refund,’ the initial payment would be made taking into account the withholding tax rate of the Member State in which the dividends or interest are paid, while the excess tax would be refunded within 50 days of the payment date.
These standardised procedures are likely to save investors around €5.17 billion a year, according to Economy Commissioner Paolo Gentiloni.
Finally, a standardised reporting obligation will provide national tax administrations with the necessary tools to verify eligibility for the reimbursements and detect any abusive practices.
Once adopted by the Member States, the proposal is expected to enter into force on 1 January 2027.
