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Withholding taxes: new EU system to avoid double taxation

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The European Commission aims to introduce a common EU-wide system for withholding tax on dividend or interest payments. The intention is to include a system for tax authorities to exchange information and cooperate with each other. Cross-border investment and simplified taxation are said to be a priority for the EU. The Commission recognises that despite the measures taken to remove tax barriers to cross-border investment, obstacles remain in the EU.

According to the Commission’s inception impact assessment, policy options include:

  • improving withholding tax refund procedures to make them more efficient;
  • establishing a fully-fledged common EU relief at source system; and
  • enhancing the existing administrative cooperative framework to verify entitlement to double tax relief.

The Commission invites feedback by 26 October 2021. A full public consultation will then take place in the third quarter of 2021, and any recommendations would be adopted in the fourth quarter of 2022.

Mark Sheiham, partner at Simmons & Simmons, commented: ‘Whilst the aim of simplifying and facilitating the process for double tax relief is laudable, the enhanced reporting requirements may auger significant administrative burdens for those who currently hold and process investor information. It will be important for all stakeholders to take an active part in the consultation process,’ (See also page 6.)

Issue: 1548
Categories: News