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EU ministers reached an agreement on the system for the application of withholding tax.

by AI | 14.May 2024 | Europe in brief AI

Czechia has clearly formulated its reservations from the beginning, which were accepted and the resulting text could therefore be supported.

Fireworks above the giant euro sign in front of the former European Central Bank (ECB) in Frankfurt on the Main. Photo: Boris Roessler/dpa

Brussels – Finance ministers from European Union countries today reached a political consensus on the proposal for a directive on a unified system of withholding tax application. The standard known by the acronym FASTER (Faster and Safer Relief on Excess Withholding Taxes) is intended to prevent misuse of tax regulations in the area of withholding tax and to streamline procedures within the European Union. Czechia was represented in the negotiations by Minister Zbyněk Stanjura.

“From the beginning, we were very skeptical because we are convinced that our system is functional and safe. However, we managed to negotiate conditions that allowed us to eventually express consent,” said Stanjura to Czech journalists in Brussels. Negotiations about Czech reservations took place on Monday with representatives of the Belgian Presidency. “In the end, the parameters were softened, and it essentially will not affect the Czech Republic, we will not have to change our functional system,” he added. According to him, Czechia clearly articulated its reservations from the beginning, which were accepted, and thus the final text could be supported. Unanimity was necessary for approval.

The directive proposal for a unified system of withholding tax application was published by the European Commission in June 2023. The main tool of the unified system is the introduction of a unified digital tax residency certificate and the creation of a central registry of financial intermediaries, i.e., entities that pay taxable income to another entity and that are required to deduct and pay withholding tax on such payment. The proposed effective date of the directive is from January 1, 2027. The proposal aims to introduce faster procedures for applying withholding taxes especially on payouts of profits and interest from publicly traded stocks and bonds.

Ministers also sought to find a political agreement on a package concerning the value-added tax in the digital age. The package has three parts, aimed at fighting fraud in the VAT area, supporting businesses, and promoting digitalization. So far, agreement has not been reached.