Directive 2025/50 - Faster and safer relief of excess withholding taxes - Main contents

Official Journal

of the European Union

EN

L series

2025/50

10.1.2025

Ensuring fair taxation in the internal market and the good functioning of the capital markets union (CMU) are among the key political priorities for the Union. In that context, removing obstacles to cross-border investment, while combating tax fraud and tax abuse is critical. Such obstacles exist, for example, in cases where inefficient and disproportionately burdensome procedures exist to relieve excess taxes withheld at source on dividend or interest income paid on shares or bonds traded publicly to non-resident investors. In addition, in some cases, the current situation has proven to be inadequate in preventing recurrent risks of tax fraud, tax evasion and tax avoidance, as shown by numerous cases of multiple tax reclaim schemes and fraud involving the use of dividend arbitrage or dividend stripping (Cum/Ex and Cum/Cum). Therefore, this Directive seeks to make withholding tax procedures more efficient, while strengthening them against the risk of tax fraud and tax abuse.

In order to strengthen Member States’ ability to prevent and fight tax fraud and tax abuse, which is currently hampered by a general lack of reliable and timely information on investors, it is necessary to provide the possibility of a common framework for the relief of excess withholding taxes on cross-border investments in securities that is resilient to the risk of tax fraud and tax abuse. That framework would lead to convergence among the various relief procedures applied in the Member States while ensuring transparency and certainty with regard to the identity of investors for securities issuers, withholding tax agents, financial intermediaries and Member States, as the case may be. To that effect, the framework should rely on automated procedures, such as the digitalisation of the tax residence certificate in terms of both procedure and form. The framework should also be flexible enough to duly take into account the various systems applicable in different Member States while providing appropriate anti-abuse tools to mitigate the risk of tax fraud, tax evasion and tax avoidance. In that regard, it is necessary to take into consideration the different approaches of tax authorities, depending on the relief system in place. Under the relief-at-source system, tax authorities are only able to obtain relevant information on the investors and the payment chain after relief is applied. By contrast, where a refund system is applied, it is crucial for the tax authorities to obtain adequate information before relief is applied in order to assess whether relief should be granted. In both relief systems, rules on the liability of the financial intermediary are established in case of undue relief. This Directive does not restrict a Member State’s ability to regulate the means by which certified financial intermediaries recoup any outlay incurred while adapting to, or complying with, the obligations laid down by this Directive.

Considering those differences and also the principle of proportionality, the provisions of this Directive regarding national registers of certified financial intermediaries and obligations to report information should not be binding on...