Individual, non-professional (“retail”) investors are significantly demotivated or hampered from investing cross-border within the EU due to:
- The widespread de facto double taxation of investment income within
the “Single Market” (for example the so-called Belgian-French Tax Treaty
to avoid double taxation is in reality organizing the double taxation
of Belgian residents holding shares of French-domiciled companies paying
much higher taxes on the dividends received from those issuers than for
Belgian-domiciled ones, and much higher taxes also than French
residents receiving the same dividends.
- Second, the lengthy, burdensome, and costly (often partial) refund
procedures for withholding tax. Our members cite a long list of
inefficiencies, such as language barriers, different bureaucratic
requirements, lengthiness and cost of procedures, lack of
digitalisation, etc. The procedures are often much more complicated and
lengthy than for US source investment income withholding tax.
In order to create a true single market for investments, the main
obstacle (taxation) for “retail” investors must be addressed through EU
action and standardised mechanisms.
Tax refund procedures are far too complicated and often too costly to
enable the average, non-professional investor to obtain refunds on
withholding tax. The most important obstacles to this are the delays in
effectively receiving the excessive WHT refund, the high compliance
costs associated with the WHT refund procedures, and the high
opportunity costs due to the delay in receiving the WHT refunds, which
ultimately lead to permanent factual double taxation suffered.
Without a doubt, the need for reform has gone beyond a mere “tax
cooperation” between EU Member States and action needs to be taken in a
harmonised manner at the EU level. The EU co-legislators must mandate
the EU Commission to propose a "relief at source" system through an EU
Regulation and significantly improve all other adjacent aspects in order
to stimulate cross-border “retail” investments. The range of measures
must simplify procedures and (only partially) avoid EU “retail”
investors being taxed twice – which is not a favour to them, but their
right – and invest on a cross-border basis, otherwise the Capital
Markets Union will remain a utopic desiderate.
Better Finance
© Better Finance
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article