Streamlining cross-border withholding tax procedures in the EU : EU FASTER and Germany’s MiKaDiv regulation

Abstract

With the recent adoption of the European Union (EU) FASTER directive, the EU intends to act against the practical hurdles for a proper taxation of cross-border income payments. At the same time, Germany is implementing the Act to Modernize the Relief from Withholding Tax and the Certification of Capital Gains Tax (ABzStEntModG) and with this, the Mitteilungsverfahren Kapitalertragsteuer auf Dividenden und Hinterlegungsscheine (MiKaDiv) reporting regulation, which aims at both the modernisation of withholding tax procedures and at anti-abuse measures, as a result of the experience with cum/cum and cum/ex tax fraud. Both regulations will have a significant impact on the processing of cross-border income payments by financial intermediaries. EU FASTER requires the implementation of new reporting regimes and will potentially change the way income payments are processed, and requires certain intermediaries to offer new services for tax relief or refund.