The EU Commission has announced its proposal for regulation, which includes new rules that it has prepared to make withholding tax procedures more effective and safe.
Accordingly, a joint EU digital tax office certificate will be developed. With this certificate, withholding tax reduction transactions will be made faster and more efficient.
Individuals with investment portfolios in various EU countries will only use one digital tax residency certificate to reclaim several returns within the same calendar year.
Withholding tax procedures, which differ between EU countries, will be standardized. Member countries will choose between two withholding tax systems.
Under the “reduction at source” procedure, the tax rate applied when paying dividends or interest will be subject to the rules in the provisions of the direct double taxation treaty. In this framework, the appropriate withholding tax rate will be deducted as soon as dividends are paid to the stocks.
Under the “fast refund” procedure, which is the other option, the first payment will be made taking into account the withholding tax rate in the member country where the dividend or interest is paid. Overpaid taxes will be charged within 50 days.
The new withholding tax system will promote fair taxation, strengthen the fight against tax evasion and support investment in EU countries.
Currently, withholding tax procedures in EU countries differ significantly. Withholding refund procedures often deter investors as they involve a lengthy and costly process.
The new rules are expected to enter into force at the beginning of 2027, following the approval of member states.