What is EU FASTER?

Transcript

So what do we know about FASTER?

Effective from January the 1st, 2030, FASTER introduces comprehensive new tax relief mechanics through the chain of financial intermediaries which become certified financial intermediaries.

This will undertake the transmission of Digital Tax residency certificates, otherwise known as eTRCs, through application of fast track tax relief procedures that involves tax relief at source and a quick refund mechanic.

Fundamentally, FASTER aims to combat tax fraud, make available access to tax relief for more of the EU market and also provide a comprehensive data set by tax reporting to the local tax authorities.

So let's move into the different FASTER processes that are applicable.

That's worth noting in our example here that the investor deals with the frontline financial intermediary in this sequence. But it may or may not be the case that the global custodian actually facilitates much of the mechanics on behalf of the investor and by dealing directly with the investors local tax authority.

So the first point of contact here is the solicitation of the eTRC.

In our example, the investor requests an eTRC from their local market tax authority. The eTRC is then supplied through that chain of intermediaries. Ultimately, it's expected that the local custodian will collect the eTRC and then manage use of the eTRC at the point of dividend distribution.

So when I'm in our example here, the dividend issuer or paying agent manages that dividend distribution with the local custodian, then the chain of CFI's in our process need to undertake tax relief at source, which can often include several additional processes such as additional disclosures, breakdowns.

Once that has been undertaken, the investor is made good on the dividends subject to the lower amount of tax. Therefore, tax relief at source has been applied. Now in the case tax relief at source has not been made accessible.

In our example here, the eTRC was provided late at the point of dividend distribution. Then the dividend issuer and local custodian would initiate the quick refund mechanics, remitting the amount of tax to the investor by way of quick refund. At the end of our dividend process then starts the tax reporting data flow.

So the chain of certified financial intermediaries or CFI's in our process must remit comprehensive data set through that chain to the local custodian or sometimes the paying agent in the market. And at the point of remitting the amounts of tax to the market, tax authority reporting is then submitted through the chain.

At the end of our process, the investor therefore obtains a digital proof of tax payment. To note here the amount of potential kinks in the chain. You're only going to be as good as the data you've obtained.

So the potential risk can grow through that chain as the funnel closes in on the local custodian and the local paying agents. So what can be done, and how does Xceptor to help?

Well, essentially, it's a common solution to the repetitive challenge presented through that chain. Everyone's looking to achieve the same outcome.

Xceptor supports the document collection, including the eTRCs and supporting documentation, and the data transmission mission, which fundamentally needs to happen proactively. That strong data standpoint will take the weight out of reactive tax relief processing. Xceptor's connector abilities allow us to synchronize with the major asset servicing platforms.

This means that your income and corporate action processes are essentially joined at the hip with tax relief mechanics. Not only under FASTER, but also for existing tax relief services. Therefore, relief at source, quick refund reporting data flows become unified and essentially live, acting as the enabler through the chain.

If you'd like to learn more about how Xceptor can support you with the FASTER directive, get in touch with us today.