What changed between the draft committee report of 9 Oct 2023 and the draft committee report of 9 Oct 2024

Removed:2. Calls on the Commission to alter its proposal accordingly, in accordance with Article 293(2) of the Treaty on the Functioning of the European Union;

Added:1. Approves the Council draft;

Removed:Recital 2: (2) In order to strengthen Member States’ ability to prevent and fight against potential fraud or abuse, which is currently hampered by fragmentation and a general lack of reliable and timely information on investors, it is therefore necessary to put in place a common framework for the relief of excess withholding taxes on cross-border investments in securities that is resilient to a risk of tax fraud or abuse. This framework should lead to convergence among the various relief procedures applied in the EU while ensuring transparency and certainty on investors’ identity for securities’ issuers, withholding tax agents, financial intermediaries and Member States, as the case may be. To this effect, the framework should rely on automated procedures, such as the digitalisation of the certificate of tax residence (in terms of procedure and form), which is a pre-requisite for investors to have access to any relief or refund procedures. Such a framework should also be flexible enough to duly take into account the various systems applicable in different Member States while ensuring greater convergence and providing appropriate anti-abuse tools to mitigate risks of tax fraud, evasion and avoidance. For the success of the framework, it is necessary that Member States equip the tax administrations with tools to deal with refund/relief at source procedures in a secure and timely manner and increase their efforts in providing digitalised, automated and better-coordinated key features. For …

Removed:Recital 4 a (new): (4 a) To ensure the effectiveness of the tax consequences of entities being determined as being shell entities, as foreseen by the Commission’s proposal for a Council directive laying down rules to prevent the misuse of shell entities for tax purposes and amending Directive 2011/16/EU1a (UNSHELL Directive), it is necessary that the procedures for imposing tax consequences in the UNSHELL Directive and the procedures for issuing an electronic tax residency certificate in this Directive are aligned. The Council should therefore clarify the interaction between the tax consequences defined in the UNSHELL Directive and the issuing of an electronic tax residency certificate defined in this Directive. / 1a COM(2021)0565.

Removed:Recital 6: (6) As the financial intermediaries most often engaged in the securities’ payment chains are large institutions as defined in the Capital Requirements Regulation (CRR)29 as well as central securities depositories providing withholding tax agent services, these entities should be obliged to request registration on the national registers of Member States established as above. Other financial intermediaries should be allowed to request registration at their discretion. Registration should be requested by the financial intermediary itself by submitting an application to the competent authority designated by the Member State, including evidence that the financial intermediary meets certain requirements. The purpose of the requirements is to verify that the requesting intermediary meets the requirements of relevant EU regulation and supervised for compliance therewith. Where the financial intermediary is established outside the EU, it is required to be subject to legislation in the third country of its residence that is comparable for the purposes of this Directive and the third country of residence is neither on Annex I of the EU list of non-cooperative jurisdictions nor on the EU list of high-risk third countries (anti-money laundering list). Registration of a third country financial intermediary should be implemented with a minimum of administrative efforts. The Commission should assist Member States to ensure that there is a coordinated understanding regarding comparable legisl…

Removed:Recital 14: (14) Any processing of personal data carried out within the framework of this Directive should comply with Regulation (EU) 2016/679 of the European Parliament and of the Council31 . Financial intermediaries and Member States may process personal data under this Directive solely with the objective of serving a general public interest, namely for the purposes of combating tax fraud, tax evasion and tax avoidance, safeguarding tax revenues and promoting fair taxation, which strengthen opportunities for social, political and economic inclusion in Member States. To allow the effective pursuit of this objective, it is necessary to restrict certain rights of individuals provided by the aforementioned Regulation, insofar as the exercise of such rights may jeopardise investigations, especially the right to be notified on the processing of their data and the scope thereof as well as the right to consent on certain types of data processing. As soon as the circumstances that justified the restriction no longer apply, the rights of the data subjects should be reinstated.

Removed:Article 4 – paragraph 2 – introductory part: 2. Member States shall issue the eTRC within three working days 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:

Removed:Article 4 – paragraph 2 – point g: deleted

Removed:Article 4 – paragraph 4: 4. If more than three working days are 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.

Removed:Article 7 – paragraph 1 – point b: (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; the Commission shall issue guidance on minimum standards for comparable legislation;

Removed:Article 19 – title: Evaluation and review

Removed:Article 19 – paragraph 1: 1. The Commission shall examine and evaluate the functioning of this Directive, after national rules transposing the Directive come into effect, every 3 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 3 years. In the evaluation report, the Commission shall:

Removed:Article 19 – paragraph 1 – point a (new): (a) examine further possible measures to facilitate self-processed withholding tax claims for small investors who engage directly with tax authorities without the intermediation of certified financial intermediaries;

Removed:Article 19 – paragraph 1 – point b (new): (b) conduct a comprehensive analysis of the development of the service fees financial intermediaries charge registered owners for the implementation of the quick refund procedure and the relief at source procedure;

Removed:Article 19 – paragraph 1 – point c (new): (c) examine whether a relief at source system could be envisaged as a procedure for all Member States.

Removed:Article 19 – paragraph 1 – subparagraph 1 a (new): The Commission may submit, where appropriate, a legislative proposal to the Council.

Removed:Article 19 – paragraph 2: 2. Member States shall communicate to the European Parliament and 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.

Removed:Article 20 – paragraph 1: 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, insofar as the exercise of such rights may jeopardise investigations and 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.

Removed:Article 20 – paragraph 3: 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 5 years.

Removed:Your rapporteur appreciates the efforts by the Commission to improve the patchwork of withholding tax procedures and to introduce a common EU-wide system for withholding tax on dividend or interest payments. The Commission proposal rightly respects the principles of simplification, subsidiarity and proportionality and suggests a system for tax authorities to exchange information and improve cooperation with each other.

Added:On 28 July 2023, the Council consulted the Parliament on a proposal for a Council Directive on Faster and Safer Relief of Excess Withholding Taxes.

Removed:In doing so, the Commission makes an effort to remove tax barriers to cross-border investments, bring down burdensome, costly and lengthy procedures and improve conditions to reduce the risks of tax fraud and abuse. With these suggestions, the Commission makes another step forward towards the completion of the Capital Markets Union. However, the success of FASTER depends on the commitment of Member States' they need to speed up efforts in providing digitalized, automated and better-coordinated key features.

Added:The Parliament delivered its opinion on 28 February 2024.

Removed:Your rapporteur recognizes that this proposal is a first step towards making withholding tax claims more streamlined and efficient across the EU, however, sees room for improvement regarding the application of the advantages of the proposals towards investors and taxpayers, which should be further explored in a comprehensive review procedure. In particular regarding possible measures to facilitate self-processed withholding tax claims for small investors, a comprehensive analysis on the development of service fees charged by financial intermediaries, as well as an examination on the universal application of a relief at source system in all Member States. Furthermore, your rapporteur sees room for being more precise in the areas of clarifying the interaction between FASTER and the UNSHELL Directive, of better protecting personal data of tax payers, and of a coordinated understanding of "comparable legislation" when it comes to the registration of a third country financial intermediary.

Added:On 14 May 2024, the Council reached a general approach on the draft Directive.

Added:However, given fundamental differences between the 19 June 2023 text of the Commission on which the Parliament was initially consulted and the text unanimously agreed in Council, the latter decided to re-consult the Parliament.

Added:According to the agreed text by the Council, the directive will introduce a common EU digital tax residence certificate (eTRC) and two fast-track procedures complementing the existing standard refund procedure for withholding taxes, as proposed by the Commission. However, the deadlines for the issuance of the eTRC and the quick refund system have been prolonged, making the tax relief ‘less fast’ than originally foreseen by the Commission’s proposal.

Added:A key change is the exemption provided to Member States who already have a comprehensive relief-at-source system in place and who have a relatively small financial market, i.e. when their market capitalisation ratio is below a threshold of 1,5% (as reported by ESMA).

Added:The Directive further introduces a reporting obligation for financial intermediaries, who will have to register in national registers established pursuant to this Directive in order to be able to request the fast-track procedures. The Council agreed to create a European Certified Financial Intermediary Portal to simplify the procedure.

Added:Finally, the Council agreement extends the original deadline for the entry into force of 1 January 2027, as foreseen by the Commission’s proposal, to 1 January 2030.

Added:In its letter requesting re-consultation, the Council is asking the Parliament to deliver its opinion as soon as possible and by 31 January 2024 at the latest. This is because Member States want to start working, together with tax authorities, the Commission and business stakeholders, on implementing acts. These implementing acts should, for instance, lay down standard computerised forms, including the linguistic arrangements, and technical protocols, including security standards, for the EU-wide eTRC.

Added:The text agreed in the Council, although not fully in line with the EP opinion, still introduces a faster tax relief process compared to the current situation. The introduction of an electronic tax residency certificate (eTRC) was supported by the Parliament, Council, and the Commission.

Added:Overall, the deal struck by the Council is not only a step in the right direction towards facilitating cross-border investments and completing the Capital Markets Union (CMU). It also introduces some important measures to detect potential tax fraud or abuse in relation with withholding taxes.

Added:However, it is regrettable that the Council decided to postpone the entry into force until 2030, given the current importance of the completion of the CMU, as recently highlighted by the reports by Mario Draghi and Enrico Letta. In view of legal certainty and citizens’ interest to have a faster withholding tax refunding process, the Council should adopt quickly the COM(2023)0324 proposal on Faster and Safer Relief of Excess Withholding Taxes.

Added:Taking into account the time needed to transpose the Directive in Member States’ legislation and the political will to speed up its adoption, your rapporteur proposes that Parliament approves the proposal without amendments pursuant to a simplified procedure without amendments (rule 52).