The withholding tax procedures of all EU member states are to be better coordinated in the future. The EU Commission has drawn up new rules for this and has now presented them.

The reform of the withholding tax procedure helps to prevent tax fraud.(Image source: Pixabay)

Aims of the reform

The revision is intended to reduce the bureaucratic burden on investors and national tax administrations when they want to recover taxes paid twice. In principle, double taxation agreements (DTAs) avoid this situation. However, due to the fact that EU countries sometimes have very different withholding tax procedures and these are often only available in the national language, the refund process is on the one hand very time consuming and on the other hand prone to abuse.

Introduction of digital proof

The Commission’s proposal provides for digital proof of tax residence, which is sufficient to be able to apply for several refunds at once. In addition, it proposes two fast-track procedures in which overpaid taxes can be refunded within 50 days or a reduced tax rate is applied in accordance with DTAs.

In general, a standardized reporting requirement would apply to allow national tax administrations to verify investors’ eligibility for reduced tax rates.

Sources: DIHK, Ecovis