On 19 June 2023, the EU Commission proposed a Council Directive on Faster and Safer Relief of Excess Withholding Taxes (WHT Directive) to tackle the problems originating from unharmonised double taxation relief procedures.
A harmonised procedure has been proposed to enhance tax fairness and a better functioning of the Capital Markets Union. To this end, the WHT Directive creates a common EU digital tax residence certificate, which would eliminate the current paper-based procedure of reclaiming tax relief. Such a certificate should be issued within one working day after its request. In addition, investors would benefit from managing multiple refund requests in one single procedure stream.
Relief from double taxation will be facilitated by the introduction of two systems: the ‘relief at source’ to insure that the tax rate that is applied at the time of payment corresponds to the applicable double taxation treaty rate; and ‘quick refund’ systems that will ensure effective refunds within 50 days of payment.
The procedures are also expected to provide tax authorities with significant savings in costs and time.
The proposal is open for public discussion until 14 August 2023 and, if approved, should enter into force on 1 January 2027.
For more information on the WHT Directive and corporate taxation in the EU, contact your CMS client partner or these local CMS experts Alexander Rangelov and Nikola Naydenov.
