The FASTER Directive (Faster and Safer Relief of Excess Withholding Taxes) is a European Union (EU) initiative aimed at simplifying and harmonizing procedures for the relief of excess withholding tax. Adopted by the EU Council in December 2024, the Directive aims to increase tax efficiency, stimulate cross-border investments, and reduce the risks of tax fraud.

What changes does the FASTER Directive bring?

The Directive proposes the introduction of rules allowing the issuance of a digital tax residency certificate, along with standardized procedures for the relief of excess withholding tax. These rules apply to dividends resulting from shares listed on the stock exchange and, in certain situations, to interest associated with bonds traded on financial markets, when the income is paid to registered owners who are tax residents in a state other than the one in which these bonds are issued.

Why was the reform necessary?

The current procedures for the reduction or refund of withholding taxes in member states are complex, slow, and inconsistent. Investors, whether individuals or financial institutions, face the following issues:

• Excessive bureaucracy – each state has its own rules, which increases the time and resources needed for compliance.

• High costs for investors – delays and procedural complexity reduce the attractiveness of cross-border investments.

• Risk of fraud – the lack of tax harmonization has allowed large-scale fraud, such as the “cum-ex” scandals.

Objectives of the FASTER Directive

The Directive proposes standardized and digitalized solutions to:

• Facilitate cross-border investments by eliminating tax barriers.

• Reduce the risk of fraud through greater tax transparency.

• Increase administrative efficiency by simplifying the work of tax authorities and financial intermediaries.

Main provisions of the Directive

1. Digital tax residency certificate (eCRF)

• Allows quick verification of eligibility for favorable tax treatments.

• Reduces the time needed to process tax relief requests.

2. Fast-track procedures for the relief of withholding tax

• Relief at source – applying a reduced tax rate at the time of payment.

• Quick refund – returning the excess tax within a fixed period, established through common regulations.

Member states are required to adopt at least one of these solutions for dividend income related to listed shares.

3. Standardized reporting for financial intermediaries

• The Directive sets rules for certified financial intermediaries, who play a key role in facilitating cross-border securities transactions. They will have to register in a national registry of certified intermediaries and comply with new reporting requirements. Among these is the obligation to provide relevant information to tax authorities, thus contributing to transparency and administrative efficiency.

For effective implementation, the EU Council extended the initial application deadline from January 1, 2027, to January 1, 2030.

Impact of the FASTER Directive

• For investors – reduced administrative costs and easier access to favorable tax treatments.

• For member states – increased tax revenues through fraud reduction and better cooperation between authorities.

• For the financial market – a more competitive and predictable tax environment for investments.

The FASTER Directive represents an important step in modernizing the European tax system. By simplifying procedures and reducing fraud risks, it supports investments and strengthens the single market. Effective implementation will bring significant benefits for both investors and the economies of member states.