With the FASTER Directive (2025/50) adopted in December 2024 and published in the Official Journal in January 2025, attention is turning to the practicalities of implementation, the challenges that remain, and the likely impact for cross-border investors and financial intermediaries. This article provides an up-to-date overview of the FASTER Directive, highlighting the latest developments, key provisions, and the issues that will shape its effectiveness in the years ahead.
What are the objectives of the FASTER Directive?
The FASTER Directive is the EU’s response to longstanding inefficiencies and inconsistencies in the WHT relief landscape. The European Commission’s economic impact assessment report highlighted that investors at present face a patchwork of over 450 different forms and procedures across the EU, most available only in national languages, with refund processes that can take many months, if not years, to complete. These delays tie up capital, create cash flow issues, and ultimately deter cross-border investment within the EU. Moreover, the complexity and opacity of current systems have provided fertile ground for tax fraud and abuse, most notably through dividend arbitrage schemes such as cum/ex and cum/cum.
The directive’s dual objectives are therefore clear: to make WHT relief faster and more predictable for bona fide investors, while simultaneously strengthening safeguards against abuse.
Scope of the directive
The FASTER Directive applies to dividends paid on publicly traded shares where the paying entity is tax resident in an EU member state and the registered owner is tax resident outside that member state. Member states may also opt to extend the regime to interest payments on publicly traded bonds. Notably, the directive does not cover all WHT scenarios—private placements, non-listed securities, and domestic payments remain outside its scope.
A significant exclusion applies for member states that have a market capitalization ratio below 1.5% (calculated over four consecutive years) and a comprehensive relief at source system already in place. This pragmatic carve-out recognizes that the compliance burden of overhauling systems in smaller markets may not be proportionate to the risk of abuse where they already have effective relief procedures in place.
Relief at source and quick refunds
Member states must implement either a relief at source mechanism—where the correct WHT rate is applied at the time of payment—or a quick refund system, under which excess WHT is refunded within 60 days of the deadline for requesting a refund. The original proposal’s more ambitious timelines have been relaxed during negotiations, reflecting member states’ concerns about fraud risk and administrative feasibility.
Where a quick refund system is used, the request must be made by a Certified Financial Intermediary (CFI) authorized by the registered owner. If the refund is not processed within the prescribed period, late payment interest may be payable, but only where national law provides for such interest, an important limitation that may blunt the directive’s effectiveness in some jurisdictions.
Certified financial intermediaries (CFIs): the new gatekeepers
A cornerstone of the FASTER regime is the introduction of CFIs—financial institutions (such as banks, custodians, and investment service providers) that are registered and recognized by the competent authority of an EU member state. Large institutions and central securities depositories are required to register, while other eligible intermediaries may do so voluntarily.
CFIs are tasked with much of the “heavy lifting” in the new system. Their responsibilities include:
- verifying the investor’s eligibility for relief, including entitlement under domestic law or double tax treaties
- collecting and retaining declarations from investors regarding beneficial ownership, absence of abusive arrangements, and notification of changes in circumstances
- ensuring the validity of digital tax residence certificates (eTRCs)
- reporting detailed information on payments and relief claims to tax authorities, using standardized digital forms.
The compliance burden for CFIs is significant, and the directive potentially could lead to liability for any loss of WHT revenue resulting from non-compliance. While the directive states that CFIs should not be required to seek information beyond what is already available to them in the ordinary course of business, the practicalities of verifying beneficial ownership—particularly given divergent national definitions—remain a source of uncertainty and concern.
Digitalization and standardization: eTRCs and reporting
The directive mandates the use of eTRCs, which must be human- and machine-readable and issued within 14 days of request (much less ambitious than the original one-day proposal). The eTRC is intended to be recognized across member states, reducing the administrative friction of cross-border claims. However, the maximum validity of an eTRC is now capped at one year, and member states retain the right to invalidate certificates if evidence emerges that the holder is not resident.
Reporting obligations for CFIs are extensive. Information must be submitted within the second month following the payment date, and member states may require additional data to identify potential abuse. The directive also introduces a European Certified Financial Intermediary Portal, providing a single entry point for CFI registration and facilitating information exchange between member states.
Exclusions and anti-abuse measures
The directive allows member states discretion to exclude certain “high-risk” cases from the streamlined procedures. These include:
- dividends on shares acquired within five days of the ex-dividend date
- dividends linked to financial arrangements (e.g., repos, stock loans, derivatives) that persist over the ex-dividend date
- payments where a non-CFI intermediary is in the chain
- claims for exemptions from WHT or non-treaty reduced rates
- dividends exceeding EUR100,000 per registered owner and payment date (with carve-outs for certain pension funds and regulated collective investment undertakings).
These exclusions are intended to balance the goals of simplification and fraud prevention, but their discretionary nature may undermine harmonization and create uncertainty for investors.
Implementation timeline and next steps
Member states must transpose the directive into national law by December 31, 2028, with the new rules applying from January 1, 2030. In the interim, technical working groups are developing the specifications for eTRCs, the CFI portal, and reporting interfaces. Seven implementing acts are expected by the end of 2025 or early 2026 to address these technical details and promote uniform interpretation.
The European Commission will monitor the directive’s impact, with the first review due by 2032 and a further evaluation by 2034. There is already speculation about a potential “FASTER 2” and even a “FASTER 3” to address unresolved issues, such as the definition of beneficial ownership and the possible extension of mandatory procedures.
Practical considerations
The FASTER Directive represents a significant step towards a more integrated and efficient EU capital market, but it is the product of compromise. Many of the original ambitions have been diluted in the face of member state concerns about tax abuse and administrative complexity. The burden on CFIs is substantial, and the risk of divergent national implementation remains.
For investors, the directive promises faster and more predictable WHT relief in theory, but the practical benefits will depend on the willingness of member states to embrace the spirit of harmonization and on the ability of CFIs to navigate the new compliance landscape. In particular, the exceptions for shares acquired within five days of the ex-dividend date and for dividends linked to financial arrangements are likely to limit or even exclude the benefits of the FASTER procedure for many institutional investors and broker-dealers. For some markets, particularly those with lengthy refund backlogs, the directive may bring much-needed relief. For others, the additional obligations may outweigh the benefits.
As the implementation phase begins in earnest, stakeholders should monitor developments closely, engage with national authorities on the technical details, and prepare for the operational changes that the FASTER regime will entail. The coming years will determine whether the directive delivers on its promise of a faster, safer, and more unified approach to WHT relief in the EU.
