On 19 June 2023, the European Commission issued a Proposal for a Council Directive on Faster and Safer Relief of Excess Withholding Taxes. The Proposal aims to introduce more efficient withholding tax (‘WHT’) procedures while, at the same time, providing Member States with the necessary tools to effectively fight tax fraud and abuse.

The EDPS notes that the Proposal would entail processing of personal data, notably personal data relating to taxpayers as natural persons entitled to receive dividend or interest income from securities subject to tax withheld at source in a Member State. Moreover, the Proposal would require Member States to provide for an automated process to issue Digital Tax Residence Certificate (‘eTRC’) for tax purposes more generally.

The EDPS welcomes that the Proposal seeks to address relevant data protection aspects, including purpose limitation, data minimisation and storage limitation. The EDPS recalls, however, that any use of the eTRC for a purpose other than applying the WHT procedures established by the Proposal would require its own (separate) legal basis under Union or Member State law. For this reason, the EDPS recommends to delete Article 4(2)(g) of the Proposal or to specify the purposes (other than the relief of WHT) for which the eTRC would be used, as well as the relevant categories of personal data.

The EDPS also welcomes that the Proposal circumscribes the extent to which data subject rights may be restricted. To ensure that the proposed restrictions do not extend longer than strictly necessary and is only applied in justified cases, the EDPS recommends including the wording ‘in so far as the exercise of such rights may jeopardise investigations’ in Article 20(1) of the Proposal.

1.   Introduction

1.

On 19 June 2023, the European Commission issued the Proposal for a Council Directive on Faster and Safer Relief of Excess Withholding Taxes (1) (‘the Proposal’).

2.

According to its Explanatory Memorandum (2), the main objectives of the Proposal are to: — support the good functioning of the Capital Markets Union (‘CMU’) by facilitating cross-border investment and; — ensure fair taxation by preventing tax fraud and abuse.

3.

To achieve these objectives, the Proposal would introduce more efficient withholding tax (‘WHT’) procedures while, at the same time, provide Member States with the necessary tools to effectively fight tax fraud and abuse (3).

4.

As explained in the Explanatory Memorandum (4), the Proposal builds on the Action Plan for fair and simple taxation supporting the recovery strategy (5) and the Action Plan on a Capital Markets Union for people and businesses (6).

5.

The present Opinion of the EDPS is issued in response to a consultation by the European Commission of 19 June 2023, pursuant to Article 42(1) EUDPR (7). The EDPS positively notes that he was already previously informally consulted pursuant to Recital 60 EUDPR.

7.   Conclusions

19.

In light of the above, the EDPS makes the following recommendations: (1) to delete Article 4(2)(g) of the Proposal or to specify the purposes (other than the relief of the WHT) for which the eTRC would be used, as well as the relevant categories of personal data; (2) including the wording ‘in so far as the exercise of such rights may jeopardise investigations’ in Article 20(1) of the Proposal.

---

(1)  COM(2023) 324 final.

(2)  COM(2023) 324 final, p. 3.

(3)  COM(2023) 324 final, p. 3.

(4)  COM(2023) 324 final, p. 3.

(5)  Communication from the Commission to the European Parliament and the Council ‘An Action Plan for fair and simple taxation supporting the recovery strategy’, COM/2020/312 final.

(6)  Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions ‘A Capital Markets Union for people and businesses-New Action Plan’, COM/2020/590 final.

(7)  Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the protection of natural persons with regard to the processing of personal data by the Union institutions, bodies, offices and agencies and on the free movement of such data, and repealing Regulation (EC) No 45/2001 and Decision No 1247/2002/EC (OJ L 295, 21.11.2018, p. 39).