Member States should incentivise household investment in regulated funds, not penalise it
Yesterday, the European Fund and Asset Management Association (EFAMA) submitted its reply to the European Commission’s consultation on the Tax Omnibus proposal, which takes an important step investors have long been waiting for. For the first time, an EU-level law would entitle pension institutions to withholding tax relief at source when receiving intra-EU dividends. This raises the ambitions of the FASTER Directive (which simplifies withholding tax procedures) and is a major step toward simplifying existing rules and eliminating double taxation on dividend payments within the EU.
While we applaud this development, EFAMA believes the new mechanism should also be available to investment funds like UCITS and ELTIFs, not limited to pension institutions. This would eliminate double taxation and avoid scenarios where the same dividend is taxed differently depending on the investment vehicle that receives it. A regulated fund receiving a dividend on behalf of thousands of retail investors typically has to pay 15–30% withholding tax at source. It must then reclaim this money from tax authorities, often over months or years, sometimes without success. This directly and negatively impacts household investors who prefer investing in well-diversified funds rather than individual stocks.
In addition, EFAMA calls on Member States to correct the following issues:
Fix the definition of “pension institution”: The new relief should cover comparable pension funds in all Member States, including those in Denmark and Spain that would otherwise be left out. It should also work in practice for pension schemes that pool their investments through funds.
Apply the Commission's timeline: Expanding the relief to include funds, with the same application date as pension institutions (2037), would have no immediate effect on government budgets in the 2028–2034 period. Member States that wish to apply the relief earlier should be able to do so.
Keep FASTER's fast-track procedures open: The Tax Omnibus reopens the FASTER Directive, which applies from 2030. Member States should use this moment to remove the option to exclude dividends above €100,000 from relief at source and quick refunds. At the very least, they should ensure new barriers are not created, and that the exclusion for UCITS, AIFs and pension schemes works in practice across Member States.
Recognise regulated funds once under the anti-avoidance rules: Member States should keep alternative investment funds among financial undertakings and exclude UCITS and regulated AIFs from the controlled foreign company rules. The carve-out for groups within Pillar Two and the new exclusion for low-risk third-party loans should also be kept as simplification measures that provide certainty and avoid duplication of compliance burdens.
António Frade Correia, Senior Tax Advisor at EFAMA, commented: “To build a true Savings and Investments Union, Member States must ensure that tax rules do not create unnecessary barriers to investment through diversified, regulated products such as UCITS, while allowing Europeans to choose how best to invest their savings. Tax rules should support that choice, not penalise it. Pension funds and regulated investment funds are not tax avoidance vehicles, and should be granted relief at source in their own right. The Tax Omnibus is the moment to fix this and eliminate double taxation on dividends received on behalf of households, pensioners, and institutional investors.
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Notes to Editors
You can find a joint statement signed by EFAMA and 22 other trade associations calling on Member States to keep the original ambition of the Tax Simplification Package here.
Find out more about EFAMA’s work on taxation here.
For further information, please contact:
Hayley McEwen
Head of communications and membership development
