By Huw Jones
LONDON (Reuters) – The European Union on Tuesday approved rule changes to speed up how tax is paid on cross-border investments, helping to deepen the bloc’s capital market.
The Council of EU states said it has reached a deal on offering relief from “withholding” or double taxation. This refers to a cross-border investor paying tax on dividends and interest on bonds in the EU state where the instruments are listed, and again back home.
Current procedures for claiming back the overpaid tax are cumbersome, despite treaties between EU states, putting people off investing outside their home state. It also hinders progress by Brussels to create a capital markets union that can compete better with Wall Street in raising funds for companies.
“It will make investing in other countries easier and hopefully encourage retail investors in particular to invest on European financial markets, which will eventually benefit the whole economy,” the Council said in a statement.
European funds industry body EFAMA said the deal is a significant step forward to removing existing tax barriers to a single capital market in the EU.
“Moving forward, we need to ensure the proposal is effective in practice, which will require further collaboration between industry and policymakers and a keen eye on national implementation,” said Antonio Frade Correia, EFAMA’s senior tax advisor.
The Council said the withholding tax initiative will make tax relief procedures faster, simpler and safer.
Under the new rules, that must come into force by January 2030, investors can obtain a common EU digital tax residence certificate to obtain fast relief from withholding taxes.
Member states must offer a “relief at source” or “quick refund” procedure, the Council said.
AIMA, which represents the alternative investments sector, said it hoped the deal was just the first step towards a fully-fledged withholding tax system, which will “go a long way towards completing the Capital Markets Union”.
(Reporting by Huw Jones, editing by Ed Osmond)
