FASTER: A European approach for more efficient withholding tax procedures

What is the FASTER Directive?

FASTER stands for Faster and Safer Tax Excess Relief. This European directive has two main objectives:

• To protect investors from double taxation;

• To help EU Member States combat tax fraud and abuse.

Today, investors in foreign shares or bonds often face a withholding tax on distributed dividends or interest. These investment incomes are then taxed again in the investor’s country of residence. Despite the existence of double taxation treaties between countries, which usually provide for a reduction or exemption of withholding tax, the procedures are cumbersome and time-consuming.

Why is harmonisation needed?

Currently, each European country applies its own rules and procedures for requesting a refund or exemption of withholding tax. For investors, this means not only administrative burdens but also uncertainty and delays. This makes investing within the EU less attractive, especially compared to other regions where tax procedures are simpler.

What will change with FASTER?

With the FASTER Directive, the European Commission introduces three major reforms to make the refund of withholding tax more efficient and secure — both for investors and for financial institutions and tax authorities.

1. Electronic Tax Residence Certificate (eTRC)

A harmonized digital tax residence certificate will be introduced across the EU. This Electronic Tax Residence Certificate (eTRC):

• Can be used for multiple refund applications within the same calendar year;

• Must be issued within one working day after application.

2. Fast-track refund procedures

The directive provides for two uniform fast-track procedures, in addition to the existing systems:

• Reduction at source: the maximum withholding tax that may be withheld under the applicable double tax treaty is applied immediately.

• Quick refund: any excess withholding tax must be refunded within 50 days from the payment date.

This approach should significantly shorten waiting times for investors and help prevent errors or abuse.

3. Standardised reporting obligation

Financial intermediaries (such as banks) will be required to report payments of dividends and interest to the relevant tax authorities. This will enable local administrations to verify whether investors are entitled to reduced rates and to detect potential abuse.

In addition, large European intermediaries will have to register in a national register of certified financial intermediaries. Smaller and non-European institutions can join on a voluntary basis.

When will FASTER come into effect?

The FASTER Directive must be transposed into national legislation by the Member States by 31 December 2028 at the latest. The new rules will then apply starting 1 January 2030.

Until then, the current often complex procedures will remain in force.

Need help with withholding tax in Belgium?

Are you investing in foreign securities and looking to apply for a reduction or exemption from withholding tax? Vandelanotte can assist you in submitting a correct and efficient application to the Belgian tax authorities.