FASTER: How The EU’s New Reclaim Directive Will Reshape WHT

The EU’s long-anticipated FASTER directive (Framework for the Automatic Exchange of Information in the Field of Taxation and Enhanced Relief at Source) has officially been adopted, and it marks a significant shift in how cross-border withholding tax (WHT) relief will be processed across the bloc.

Designed to address longstanding inefficiencies and reclaim delays, the directive represents a bold step toward modernising tax operations and creating a more investor-friendly environment across EU capital markets.

FASTER is a legislative initiative from the European Commission aimed at improving the speed and reliability of tax relief procedures for investors receiving dividends and interest payments in a cross-border context.

Its two central features are:

1. Relief at Source – allowing eligible investors to benefit from treaty-based tax rates at the time of payment, not years later via reclaim forms.
2. Quick Refund System – mandating that where relief at source is unavailable, reclaims must be processed within 50 days of request submission.

The directive also introduces standardised reporting and digital certification of tax residency, using blockchain-compatible or centralised platforms to reduce fraud and improve traceability.

Under the current fragmented system, investors often suffer excess withholding — typically at domestic statutory rates (e.g. 30%) — and must endure lengthy, bureaucratic reclaim processes that vary by country.

This has led to:

• Refund delays of months or even years
• High administrative burdens on custodians, intermediaries, and investors
• Inconsistent interpretations of tax treaty eligibility
• Risk of double taxation and disputes

FASTER addresses these pain points with a harmonised framework that promotes:

• Efficiency: streamlined processes across member states
• Transparency: mandatory digital records and tracking
• Equity: equal treatment of foreign and domestic investors
• Fraud Reduction: real-time validation of investor status and entitlements

For custodians, paying agents, and financial intermediaries, FASTER will not just be a regulatory change — it will demand operational transformation.

Key implications include:

• System upgrades: to handle relief-at-source rules and digital certification
• Data management: ensuring real-time accuracy of beneficial ownership and tax residency
• Client outreach: educating clients on new procedures and obligations
• Coordination with tax authorities: across multiple jurisdictions in near real-time

The directive will apply to both EU and non-EU investors, meaning global institutions with European portfolios must be compliant to avoid disruption.

Implementation deadlines are staggered, but core obligations are set to come into effect by 1 January 2027, with member states required to transpose the directive into national law by 2026.

Early adopters may begin pilot testing digital tax residency systems as early as 2025.

FASTER represents not just a compliance challenge, but an opportunity for institutions to modernise their tax operations and improve client experience.

At Edwards Fosse, we’re working with clients to:

• Map their end-to-end reclaim and relief processes
• Prepare for new regulatory reporting formats
• Develop governance frameworks that align with digital residency and eligibility checks
• Identify affected investors and systems

Contact our team to assess your operational readiness and design a roadmap for implementation.

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