The new Code of Conduct published by the European Commission offers solutions aims to put an end to double taxation headaches on cross-border investment income.
A withholding tax is a tax withheld at source in the EU country where investment income such as dividends, interests, and royalties is generated.
Under the current regime the income is often taxed again in the member state where the investor is resident and refund procedures are currently difficult, expensive and time-consuming.
The commission’s recommendations, include quick, simplified and standardised procedures for refunding withholding taxes.
“This is yet another important building block on the road towards a true single market for capital,” Valdis Dombrovskis, vice-president in charge of financial stability, financial services and capital markets union.
“Today’s code of conduct should help investors to avoid long delays and high costs when claiming withholding tax refunds. We will now work closely with Member States to make sure that the new code of conduct delivers tangible results.”
Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said: “My hope is that today’s Code of Conduct will help EU countries to navigate the fine balance between ensuring a consistent tax collection on income and offering tax certainty to businesses that lose out on an estimated €8.4bn (£7.4bn $9.89bn) in compliance costs each year.”
Implementation of the Code of Conduct is voluntary for Member States. It provides a snapshot of the problems faced by cross-border investors and explains how more efficient tax procedures can be put in place. The code outlines a range of practical ways for Member States to address key issues including:
- Measures to help smaller investors for whom the rules on the refund of withholding tax are overly complex;
- The creation of user-friendly digital forms to apply for withholding tax relief in the case of overpayment;
- A reliable and effective timeframe for tax authorities for the granting of withholding tax relief;
- A single point of contact in Member State tax administrations to deal with questions from investors on withholding tax.
