EFAMA welcomes 'significant step' towards removing tax barrier to Capital Markets Union

EFAMA has welcomed the EU Ministers of Finance 'faster proposal' agreement reached at their Economic and Financial Affairs (ECOFIN) meeting on 14 May.

In a statement, EFAMA said the initiative was "a significant step forward to remove existing tax barriers to the Capital Markets Union (CMU)".

The directive has the potential to harmonize tax procedures across EU countries, rectify inefficiencies, eliminate double taxation and mitigate fraud-related costs, thereby encouraging more cross-border investment in the EU.

At this moment when a lot of focus is rightly being placed on EU competitiveness, EFAMA said it supported this positive initiative and believes it will foster deeper integration of EU capital markets.

It particularly welcomed the following:
• All Member States will issue common EU digital tax residence certificates, which is a welcome departure from burdensome paper-based procedures.
• Investors will benefit from streamlined fast-track procedures for withholding taxes on dividends.
• National tax authorities will have additional due diligence, reporting, verification and tax audit mechanisms to combat fraud.

António Frade Correia, senior tax advisor at EFAMA, said: “Today’s decision by the Ministers of Finance is a very welcome step to improve inefficient and burdensome tax procedures which dis-incentivise cross-border investing.

"It took several years of collaborative effort involving the European Commission, national tax authorities, industry representatives and the Spanish and Belgian Council Presidency teams. Moving forward, we need to ensure the proposal is effective in practice, which will require further collaboration between industry and policymakers and a keen eye on national implementation.”

Once the proposal is formally adopted by the Council, implementing acts, national legislations and administrative guidance will need to be prepared and adopted by 31 December 2028 (to start applying in 2030).

Going forward, ESMA hoped that Member States would implement a proposal that works well in practice, does not create additional hurdles when things are working well, and keeps sight of the fundamental goals aimed for in the long-run.