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Brussels proposes rules to speed up tax refunds for dividends

Date: June 18, 2024 Time: 12:47:02

The European Commission has launched a new proposal this Monday to speed up the regulations on the refund of taxes collected by the Treasury on dividends when there is double taxation. The EC proposes thus to tackle the abuses that allow this practice to be used to avoid paying taxes, as occurred in the Cum-Ex and Cum-Cum scandals. Thus, Brussels proposes forcing Member States to implement a digital certificate of tax residence that allows the investor to make claims in any of them, as well as establishing accelerated processes to make tax refunds.

Many States of the European Union make withholdings on account to investors who live in another the dividends for shares by bonds leftovers that they get, but they then have to pay income tax again on that income in their own country. To avoid this double taxation, many countries have signed agreements that allow the foreign investor to obtain a refund of part of what they paid for withholding, but to do so they have to file a claim whose process is “long, expensive and cumbersome”. , according to the Commission and collects Efe.

In addition, the system is open to abuse, such as dispelling the Cum/Ex scandal, in which investors sold shares shortly before the dividend payment but turned it over to the buyer after it, allowing both to compromise the tax refund, or the well-known such as Cum/Cum, in which a foreign investor passes the shares to a resident of the country where the company is headquartered so that the latter can obtain a tax credit whose benefits they later share.

“We are deeply concerned”

“We are deeply concerned by the Cum/Ex and Cum/Cum scandals, where withholding tax refund procedures were horribly abused. It is estimated that they have generated losses of 150 billion euros between 2000 and 2020,” he said. the European Commissioner for the Economy, Paolo Gentiloni, presenting the proposal.

The Community Executive proposes in the first place to simplify the procedures to make life easier for tax agencies and investors, who today deal with up to 450 different forms, creating a common digital tax residence certificate, so that those who have a diversified portfolio between different states they can use a single electronic document to claim their tax refund. It also proposes creating “fast” procedures for refunds and allows countries to choose between two options.

Source relief is “the best solution for the investor, but it is very much based on transparency and trust”

The first would be to apply the tax relief directly at the source so that when the tax on the dividend is collected, the rate agreed in the double taxation agreement would already be applied, while the second would consist of following the standard procedure that exists today. but guaranteeing that the return occurs within a maximum period of 50 days after making the payment.

The relief at the source is “the best solution for the investor, but it is based a lot on transparency and trust” since the control is only done after payment, which is why some Member States that had problems of abuses in the past they lean towards the current procedure, community sources explained.

To avoid abuses, the Commission introduces safeguards, so that they could not use accelerated processes when the owner of the share has changed in the last two days before the payment of the dividend or when there are agreements whereby the share changes hands temporarily and in around the payment date, in order to avoid cases such as Cum/Ex and Cum/Cum respectively. These expedited procedures would allow investors to save

Also in order to make it easier for the tax authorities to verify which investors are entitled to a refund and prevent abuse, the Commission proposes to create registers of “certified” financial intermediaries, in which large EU firms will have to register compulsorily – and voluntarily small or from third countries-, which will have to inform the Treasury of the payment of dividends or interest.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.
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