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On May 14, 2024, the EU Council reached a landmark agreement on new rules aimed at making withholding tax procedures safer and faster. This agreement, known as the FASTER initiative, is designed to streamline the process for obtaining double taxation relief, encouraging more cross-border investment while combating tax abuse.
Key Highlights of the FASTER Initiative:
Simplified Procedures
The initiative aims to simplify the process for obtaining withholding tax relief under double tax treaties, making it easier for investors to navigate.
Currently, for cross-border investments, many EU member states tax dividends (from stocks and shares) and interest (from bonds) paid to foreign investors. At the same time, these investors must also pay income tax on the same earnings in their home country.
Although treaties between member states aim to prevent double taxation, the actual process for claiming withholding tax relief varies widely across countries. This leads to slow, expensive, and complicated relief or refund procedures. Additionally, these processes can be prone to large-scale tax fraud.
The new withholding tax initiative aims to make tax relief procedures faster, simpler, and safer for everyone involved.
Digital Tax Residence Certificates
A common tax residence certificate, issued digitally, will standardize and expedite the proof of tax residency. A tax residency certificate is an integral part of international tax planning and trading. Whether you need to confirm your company’s tax residency: for opening a bank account, for international transactions and deals, or to avoid double taxation, Malta does issue the certificates, that will meet any specific requirements of your business.
If you would like to learn more, follow the link:
Tax certificates for Malta companies: in-depth review with real-life examples
Fast-Track Procedures
Complementing the existing standard refund process, new fast-track procedures will speed up withholding tax refunds:
- “relief-at-source”: procedure that applies the relevant tax rate at the time of dividend or interest payment;
- “quick refund” system ensures timely reimbursement of any overpaid withholding tax within a specified deadline for your convenience.
Standardized Reporting
Financial intermediaries, such as banks and investment platforms, will benefit from standardized reporting requirements, reducing administrative burdens.
EU countries are required to adopt the Directive into their national laws by December 31, 2028. These new rules will then take effect starting January 1, 2030.
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