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Tax digitization requirements are sweeping like a wave across Europe. Most notably, the EU’s landmark FASTER directive will come into force in January 2030, requiring financial services organizations to adapt to new withholding tax (WHT) processes and reporting requirements. At the same time, Germany’s Modernisation Tax Act - parts of which have been delayed to align with FASTER standards - will demand compliance with FASTER requirements as soon as 2027, and other countries may take a similar approach.
FASTER and other country-specific initiatives aim to simplify compliance, reduce double taxation, and streamline operations - but organizations must act now to get ahead. This article explores the barriers organizations must overcome to prepare for FASTER and how a data automation platform such as Xceptor can help you succeed amid the transition to digitized tax processes.
The challenges of today's Withholding Tax processes
Today, WHT procedures are highly fragmented and inconsistent. In the EU, financial services providers must navigate requirements from 27 different tax authorities, each with unique formats and rules.
Firms’ own complex technology and data landscapes make WHT processes even more cumbersome. Manually gathering data from fragmented systems for complex tax calculations and reporting procedures is time-consuming and error-prone: in fact, 28% of financial services organizations report that errors related to manual processes are their biggest pain point. And though firms are investing in data management, only 33% expect their efforts will reduce errors and redundancies. The heavy reliance on paper-based workflows further slows WHT processes and increases the risk of errors.
FASTER: the push for modernized tax processes
FASTER is a welcome catalyst for change for a segment of the industry that has long been challenged by siloed, paper-based processes. FASTER will standardize procedures, accelerate access to tax relief, and curb both double taxation and tax abuse. It will also require quicker issuance of digital tax residence certificates (e-TRC) and more efficient cross-border tax relief procedures.
But to achieve these benefits, organizations will need to:
- Adapt their systems and processes to new standards, including a common digital tax residence certificate (e-TRC) that must be issued within 14 days.
- Adopt new fast-track procedures to access tax relief, in which states will implement either "relief at source" or "quick refund".
- Prepare for new certification processes, in the case of certified financial intermediaries (CFIs), which are large institutions that manage dividend payments and central securities depositaries.
- Comply with new EU-wide common reporting requirements. CFIs will need to collect data from investors and previous intermediaries in the income chain, reporting income, trading, and financial arrangements data throughout the chain.
Adapting to FASTER will demand significant effort, but digitization offers firms the opportunity to differentiate their tax service offerings. By investing in technology that helps them comply not only with FASTER but other recent and future tax regulations, financial services organizations can strengthen their global compliance posture and serve clients more effectively.
How to prepare for FASTER
Technology will play a key role in the successful implementation of FASTER. But with so many details yet to be determined by the EU and member states, what can financial intermediaries and technology vendors do to prepare?
There are a number of areas where organizations can take action. For example:
Flexibility and extensibility
As you prepare for near-term deadlines such as the German Modernization Act, make sure the technology you’re implementing and changes you’re making to tax processes - such as validation of minimum holding periods and anti-abuse processes - can easily be extended to other markets.
Access to relevant data
There’s a clear trend in recent regulation to demand more data, mainly around transaction history and beneficial ownership. Developing an appropriate data model in which key data sources and dependencies are mapped to FASTER requirements is a key step toward meeting regulatory data requirements.
Changes to processes throughout the client lifecycle
Regulators are also increasingly requesting data to be provided throughout the custody chain. Financial intermediaries might be required to obtain data from investors and beneficial owners that are not their direct clients (i.e., the clients of their clients).
It will be critical to define the base processes in which financial intermediaries handle that data. Ideally, where possible, custody chain data should be requested up front, at the moment of onboarding or account opening, instead of waiting for a divided payment to trigger data requests.
An automation platform like Xceptor is the ideal solution to help you tackle these diverse, evolving requirements.
Xceptor offers an end-to-end solution for operational tax processes that helps organizations manage complex tax challenges, reduce risk, and increase productivity. Our highly configurable platform, which supports thousands of use cases across tax and beyond, serves as an automation foundation that adapts easily to new workflows - a critical asset in the rapidly evolving world of tax.
Getting ahead of FASTER means gaining a competitive advantage
The deadlines to comply with country-specific and EU-wide regimes may seem like a long time away, but as we know well from the past decade of digital transformation, large-scale technology implementations take time, money, effort, and resources to get right.
What’s more, organizations that start the FASTER transformation process now will be able to offer a superior experience to clients sooner than competitors. The investments you make ahead of FASTER in infrastructure, automation, and change management will position you to keep up with regulations, streamline workflows, and deliver uniquely competitive operational tax services. It’s not just about operational efficiency - it’s about building trust with clients by delivering faster, more transparent services.
Ready to start digitizing end-to-end tax processes today? Discover how Xceptor’s automation platform can transform your tax operation end-to-end. Schedule a demo to explore how we can help you simplify compliance and stay ahead of FASTER.
