FASTER: EU Council adopts the directive – What is coming up?

FASTER essentially aims to facilitate withholding tax relief and recovery across the EU.  In this context, the issuance of tax residence certificates across the EU is streamlined as well (which will need to be issued as digital certificates within 14 days and will be recognised across the EU).  On the other hand, to prevent abuse (such as the “cum/cum” and “cum/ex” cases), certain information exchange obligations will apply regarding, a.o. holding periods and certain unsettled financial arrangements.

 

Who is concerned?

Financial intermediaries registered as Certified Financial Intermediaries (“CFI”).  An EU portal will be setup to facilitate registration in the EU Member States.  Large EU financial intermediaries will be obliged to register, while smaller EU financial intermediaries and non-EU intermediaries will be allowed to register on voluntary basis.

Who benefits from this?

The main positive effect will be for securities account holders, who will more easily benefit from withholding tax reductions/exemptions through the CFI.

As opposed to the initial text, an interesting change is that additional provisions were added for indirect investments, relevant where certain collective investment undertakings / their investors may be entitled to relief.

Relief procedures

The standard relief procedure will be mandatory for dividends from publicly traded shares and optional for interest income from publicly traded bonds (and apply where the listed entity is tax resident in the EU).  EU Member States may opt to introduce:

• A relief at source procedure;
• A quick refund procedure (within 60 days); or
• A combination of both procedures.

Will this apply across the EU?

Not necessarily: EU Member States could opt-out, under certain conditions (if the EU Member State has comprehensive relief at source provisions and a low market capitalisation ratio).

When will this enter into force?

The EP should still review the final version of the Directive; however, it is not expected that this should still lead to significant changes.  Based on the current text, EU Member States should transpose FASTER before the end of 2028.  Concrete application should start as from 2030.

Time to consider the impact

Although the go-live is still a few years ahead of us, financial intermediaries should start impact analysis and consider implementation well in advance.  Within an implementation context, a.o. strategic considerations, internal processes and procedures tailored to the different departments involved, trainings for resources having to apply FASTER, and compliance programs should be considered.  Typically, IT infrastructure should be updated and enriched, which generally is a process absorbing significant time within financial institutions.

 

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