ALFI responds to EC consultation for a new system on excess withholding taxes

ALFI has provided its opinion on the draft Directive on the eTRC proposed by the European Commission.
As a reminder, the European Commission introduced the FASTER Directive on 19 June 2023 to simplify and expedite cross-border withholding tax relief, improving efficiency and combating tax fraud. Key provisions include a common EU digital tax residence certificate, national registers for certified financial intermediaries, and relief at source or rapid refund mechanisms for timely withholding tax payments.
ALFI supports the digitalization of the reclaim and relief processes and welcomes the introduction of standardized EU forms for withholding tax refund in digital format. They also recommend clear explanations on relief and reclaim procedures on national tax authorities‘ websites. ALFI suggests that the scope of the eTRC should cover both publicly traded shares and bonds, as well as non-listed securities, to ensure harmonization and legal certainty. They also recommend extending the acceptance of eTRCs by Member States to cover legacy reclaims. ALFI suggests maintaining flexibility in the production of eTRCs to allow for specific reference to treaties or treaty provisions, particularly with third countries. They propose that the European Commission consider measures to encourage third countries to accept eTRCs.
ALFI highlights the difficulties faced by investment funds in accessing double tax treaties, which hinders cross-border investment. They support the recognition of investment funds as beneficial owners of income received, allowing them to benefit from existing double tax treaties. ALFI emphasizes the role and responsibilities of CFIs in processing relief at source or quick refunds. They recommend refining the wording of the draft Directive to define the scope of CFIs‘ duties and rights more precisely. ALFI also suggests providing detailed guidance on information flow between financial intermediaries and clarifying the reporting responsibilities and liabilities of CFIs.
Confidentiality concerns, professional secrecy rules, and reporting periods are also addressed by ALFI. They recommend considering and addressing confidentiality concerns and professional secrecy rules in addition to GDPR requirements. ALFI suggests that reporting periods could be challenging for CFIs and proposes alternative reporting timelines to ease operational challenges.
Finally, ALFI acknowledges the ambitious timeline for adoption and implementation of the Directive but suggests a longer period for proper consideration, guidance development, and industry collaboration.