Faster directive: opportunities and challenges for cross-border tax procedures

The European Commission’s Faster directive seeks to streamline withholding tax procedures for cross-border investments, a long-standing objective for financial markets in Europe. By introducing more efficient processes, the initiative aims to reduce administrative burdens, improve investor experience and strengthen the integration of European capital markets.

From the perspective of the Luxembourg financial centre, the directive is broadly seen as a positive step forward. However, as highlighted by Laetitia Carroz, Senior Adviser – Tax at the ABBL, several aspects of its design and implementation still raise important questions.

Interview with Laetitia Carroz, Senior Adviser – Tax at the ABBL, originally published in the Paperjam Wealth Management & Private Banking supplement (March 2026 issue, published on 25 February).

A welcome step towards simplification

For the Luxembourg banking sector, the Faster directive represents a meaningful effort to simplify and secure withholding tax procedures applicable to cross-border investments.

One of its key innovations is the introduction of the electronic tax residence certificate (eTRC), which is expected to facilitate and accelerate the processing of tax relief.

For an internationally oriented financial centre such as Luxembourg, improving the efficiency of withholding tax procedures is essential. Greater simplification benefits both investors and financial intermediaries, while supporting the broader objective of a more integrated European capital market.

In this context, the ABBL has consistently advocated for stronger harmonisation at EU level, as a more convergent framework would enhance investor confidence and support the free movement of capital.

Risks of fragmentation

Despite these benefits, the directive also introduces a number of options and carve-outs that may lead to fragmented implementation across Member States.

This could result in financial intermediaries having to manage multiple parallel processes, including:

• relief at source mechanisms
• refund procedures under the Faster framework
• existing national processes that may not align with the directive

Such fragmentation risks reducing the overall effectiveness of the initiative and creating additional operational complexity.

To address this, the ABBL emphasises the importance of broad and consistent transposition across Member States, in order to avoid diverging practices that could undermine the directive’s objectives.

The need for proportionality and simplification

Another key concern relates to the obligations placed on financial intermediaries, in particular Certified Financial Intermediaries (CFIs).

The ABBL calls for a proportionate approach to ensure that the directive does not introduce a new layer of administrative burden that would counteract its intended benefits.

In particular, the association advocates for:

• simplified reporting requirements, ideally through a single reporting channel
• the possibility of centralised reporting mechanisms, potentially at European level
• clearer and more streamlined operational processes

Such measures would help ensure that the directive effectively delivers on its core objectives of efficiency, harmonisation and speed.

Clarifying liability in complex payment chains

The directive establishes the principle that the CFI acts as the primary point of accountability vis-à-vis tax authorities. However, in practice, the allocation of liability remains complex, particularly in multi-layered custody and payment chains.

Operational and legal uncertainties may arise where errors originate from entities that are:

• not registered as CFIs
• located outside the EU framework

Further guidance from the European Commission and national authorities will therefore be essential to clarify how liability should be allocated in such cases.

Implications for investors

The directive also raises practical questions regarding investors who hold accounts with intermediaries that are not registered as CFIs.

In such situations, investors may not benefit directly from Faster’s relief at source or quick refund procedures, unless another intermediary in the chain assumes responsibility under a specific arrangement.

Otherwise, they will need to rely on traditional refund processes, which are generally slower, more administrative and subject to varying national requirements.