FAQ FASTER
The FASTER Directive (“Faster and Safer Tax Relief of Excess Withholding Taxes”) aims to improve withholding tax procedures in the European Union (“EU”) with more safety and efficiency for cross-border investors, national tax authorities and financial intermediaries. FASTER is articulated around three main pillars: a common digital tax residence certificate (“eTRC”), fast track procedures and a standardised reporting for financial intermediaries.
To perform such reporting under FASTER, large financial intermediaries and/or Central Securities Depositories (“CSD”) and/or International Central Securities Depositories (“ICSD") must register themselves through a dedicated portal to be certified financial intermediaries (“CFI”).
CFIs will play a major role as they must carry out due diligence and verification regarding the entitlement and eligibility of the registered owner to request relief at source or quick refund on behalf of the beneficial owner. The registered owner is defined as any natural person or entity that is entitled to receive dividends or interest from securities subject to tax withheld at source in a member state as the holder of the securities on the record date, and that is not a financial intermediary acting for the account of others with respect to those dividends or interest.
When will FASTER be applicable?
There are several steps before the FASTER directive becomes effective.
- 19 June 2023: The initial project was launched.
- 28 February 2024: The European Parliament adopted the text (consultative opinion).
- 14 May 2024: The text was modified, and the compromise version was approved by ECOFIN.
- 14 November 2024: Following amendments to the initial text, it was adopted by the European Parliament again (consultative opinion).
- 2024-2026: The European Commission is expected to provide guidelines (implementing acts) on the implementation before member states transpose it into their local laws. The purpose is to ensure an effective implementation of the Directive.
- 10 January 2025: The text was published in the Official Journal of the European union.
- 31 December 2028: Member states must transpose the directive in their respective national legislation.
- 1 January 2030: The FASTER directive becomes effective, and national legislations will be applicable accordingly.
Which countries will be part of FASTER and will relief at source/quick refund be available in every country?
Each member state within the EU which has a market capitalisation ratio equal to or above 1.5% will be part of FASTER. The market capitalisation ratio is a percentage of the market capitalisation of a member state on 31 December to the overall market capitalisation of the European Union on 31 December, in a given year.
It means that it will be mandatory for these member states to set up a relief at source and/or a quick refund system in line with FASTER requirements.
Member states which are below 1.5% of the market capitalisation ratio will be also part of FASTER if they do not have a global withholding tax relief system similar to the FASTER directive, so called a comprehensive “Relief at Source system”.
What types of assets are covered by FASTER?
The directive covers dividends from publicly traded shares. However, member states will have the option to include publicly traded bonds.
Is it mandatory to register as a CFI?
It is mandatory for large institutions and CSDs.
It is on a voluntary basis for all other entities (including those that are established in a third-party country) acting as financial intermediaries and meeting specific requirements under the FASTER directive.
Is there a common portal for registration of CFI?
To be certified, Financial intermediaries must proceed to their registration via the future European Certified Financial Intermediary Portal, a single-entry point. Then, the applications should be forwarded, through the European Certified Financial Intermediary Portal, to the relevant member states.
What are CFIs obligations?
CFIs shall provide to the member states:
- Identification of the dividend or interest payment as referred to in Annex II of the Directive;
- The legal basis of the applicable WHT tax rate and total amount of excess tax to be refunded;
- The tax residence of the registered owner;
- The registered owner’s declaration
CFI shall verify:
- The eTRC of the registered owner and/or appropriate proof of tax residence in a third country;
- The registered owner’s declaration and tax residence;
- The registered owner’s entitlement to a specific reduced withholding tax rate in accordance with a double tax treaty;
- The possible existence of any financial arrangement;
- If the underlying securities have been bought within five days before the ex-dividend date.
Is there an EU common portal for the eTRC?
There will be a common portal where investors can request their eTRC.
What CFIs need to report and under which timeframe?
Within the second month following the payment date, CFIs will have to report all information mentioned in the Annex II of the Directive:
- Person providing the information (CFI or Tax Agent);
- Recipient of the dividend or interest payment (Beneficial Owner);
- Payor of the dividend or interest payment (Financial Intermediary from which the reporting entity receives the dividend or interest payment);
- Dividend or interest payment;
- Application of anti-abuse measures to be met by the CFI who requests the relief.
The reporting can be direct, where CFI should report directly to the competent authority of the source member state or indirect, where each of the CFI along the securities payment chain should provide the information.
Regarding the quick refund, CFI must introduce the request within the second month following the month of the payment date. The refund will be received from the member state within 60 calendar days after the end of the period to request the quick refund
What will be the format to report?
The reporting will be done through a standardised XML format scheme. It will be defined by implementing acts from the European Commission.
What will be the impacts for Clearstream clients?
As intended by the Directive, we expect more possibilities to obtain relief at source and quick refund especially in markets where they are not currently available. The operational procedures are going to change for Clearstream clients. Clearstream will publish further information on this as soon as available.