EFAMA welcomes the consultation that the European Commission launched on the cross-border distribution of different types of investment funds (AIFs, UCITS, EuVECA/EuSEF, and ELTIF) and the opportunity to respond as to the remaining barriers to marketing funds across the EU single market, as well as the ways to eliminate them. We, also, fully share the goal of the European Commission in seeking further ways to deepen the Single Market for investment funds.
Withholding Taxes (WHT) are a source of income for Member States, with raise revenues helping fund public expenditures. However, burdensome procedures for WHT reliefs and refunds have long proved a barrier to a well-functioning capital market. They hinder cross-border investment, disrupt financial processes such as clearing and settlement, increase the cost of cross-border trading and are an obstacle to achieve a single European securities market. Such taxes are often particularly burdensome for individual and small investors, many of whom forego their right to claim back WHT. The resulting misallocation of financial resources undermines investment within the EU. A European Commission report stresses that existing WHT procedures can be generally demanding, resource intensive and costly for investors.
EFAMA advocates that the Commission consider sending a recommendation to EU Member States asking to abolish the WHT for payments made to UCITS and AIFs to ensure that the free movement of capital principle prevails. EFAMA generally supports the EC Code of Conduct on WHT as well as the efforts of the European Commission to launch the CMU and all related initiatives to remove tax barriers within the EU. EFAMA also appreciates the follow-up work currently carried out by the EC with member states to improve the efficiency of procedures applicable to WHT. In addition, EFAMA is closely following the OECD TRACE project since its inception and we are monitoring its implementation in Finland.
EFAMA response to the European Commission’s consultation on the barriers to cross-border distribution of funds
EFAMA would like to make positive use of the opportunity to comment on the Commission recommendation dated 28 January 2016 on the implementation of measures against tax treaty abuse as well as on the implementation of TRACE for the purpose of simplifying withholding tax (“WHT”) procedures.