Recovering excess withholding tax remains one of the main tax frictions associated with cross-border investment.
Under a double taxation treaty, domestic legislation or European Union law, a non-resident investor may be entitled to a lower level of taxation than that initially applied to a dividend. However, recognition of that entitlement does not always prevent withholding tax from first being levied at the standard rate, leaving the investor to claim a refund of the excess afterwards.
In Spain, for example, a non-resident taxpayer who has suffered withholding tax above the amount ultimately due may request a refund using Form 210. Where an investment is held through a chain of financial intermediaries, the Spanish tax authorities may also require documentation establishing the traceability of the payment and the tax withheld.
The European Union aims to make precisely these procedures faster, more consistent and more secure through the FASTER Directive.
The issue has gained further relevance following the judgment of the Court of Justice of the European Union of 17 September 2026 in Case C-139/25, iShares Europe ETF. The judgment confirms that, in certain circumstances, the right to recover withholding tax on dividends may arise not only from a double taxation treaty, but also from the prohibition of discriminatory treatment between resident and non-resident funds.
Council Directive (EU) 2025/50 of 10 December 2024 on faster and safer relief of excess withholding taxes was published in the Official Journal of the European Union on 10 January 2025.
Member States must transpose the Directive by 31 December 2028, and the new provisions will apply from 1 January 2030.
As a general rule, FASTER does not introduce new reduced tax rates for dividends or replace double taxation treaties. Its purpose is primarily procedural: to enable an investor who is already entitled to an exemption or a reduced withholding tax rate to obtain that treatment more quickly and through standardised procedures.
At the same time, the Directive seeks to strengthen safeguards against abusive practices involving withholding tax refunds, particularly arrangements that use securities transactions or chains of intermediaries to obtain refunds to which the claimant is not entitled.
One of the main features of FASTER will be the introduction of a common European digital tax residence certificate.
At present, the method of proving tax residence, the format and validity period of certificates, and the process for obtaining them vary across Member States. This lack of consistency increases the administrative burden for investors, financial intermediaries and tax authorities.
Under FASTER, Member States must establish an automated process for issuing a digital tax residence certificate. According to the final text of the Directive, it must generally be issued within 14 calendar days of the request, without prejudice to any additional checks that may be required. The other Member States must recognise it as evidence of tax residence.
A common format should significantly simplify one of the first requirements for applying a double taxation treaty or claiming a refund of excess withholding tax.
The most significant aspect of FASTER is the creation of common procedures to prevent or recover more quickly excess withholding tax on certain investments.
The Directive provides for two main mechanisms.
Under the relief-at-source system, the withholding tax rate to which the investor is entitled is applied directly when the dividend is paid. If the applicable treaty provides for a rate below the rate established by domestic law, the investor would not first have to suffer withholding at the full rate and subsequently claim a refund.
The second mechanism is a quick refund procedure. Withholding tax is initially levied, but the excess is recovered through an accelerated process. The Directive requires Member States to process these claims within 60 calendar days following the expiry of the period established for requesting the quick refund.
This represents an important change from systems in which recovering the excess may involve lengthy procedures, with the corresponding financial and administrative impact on the investor.
FASTER does not, however, abolish ordinary refund procedures. These procedures will continue to be required in cases that fall outside the accelerated system.
The new framework will depend to a large extent on the entities operating between the issuer of the securities and the final investor.
FASTER provides for national registers of certified financial intermediaries (CFIs), connected through a European portal.
Certain large financial intermediaries and central securities depositories will be required to register, while other entities may do so voluntarily if they satisfy the relevant conditions.
Before applying an accelerated procedure, these intermediaries will be subject to reporting and verification obligations. Among other matters, they must verify the investor’s tax residence, entitlement to the requested reduced rate and certain features of the transaction that may be relevant to identifying risk.
The Directive therefore introduces a traceability framework for payment chains that seeks to reconcile two objectives that have not always been easy to combine: accelerating legitimate refunds and strengthening safeguards against improper claims.
Access to the accelerated procedures will be subject to a number of conditions.
Member States may exclude certain cases presenting a higher tax risk. These include certain acquisitions of shares close to the ex-dividend date, transactions linked to particular financial arrangements, breaks in the chain of certified financial intermediaries and certain high-value dividend payments.
These rules respond, among other matters, to the European experience with arrangements known as cum-ex and cum-cum, in which structures involving shares and dividends have been used to obtain improper withholding tax refunds.
FASTER should therefore not be understood solely as a simplification measure. It is also an information exchange and control framework.
Although the Directive will apply from 1 January 2030, its implementation is already having practical consequences.
In Spain, the 2026 Annual Tax and Customs Control Plan expressly states that the Spanish Tax Agency has begun adapting the forms, systems and procedures governing refunds of withholding tax to non-residents to the new FASTER framework.
In June 2026, Forms 210 and 296 were also amended in areas affecting withholding tax on income obtained by non-residents. Among other changes, Form 210 now includes a specific breakdown of dividends that allows certain income from negotiable securities to be grouped together.
In parallel, the European Commission plans to open a consultation during the fourth quarter of 2026 on the FASTER Implementing Regulation, which is expected to develop some of the technical aspects required for the new system to operate consistently across Member States.
The legislative framework also continues to evolve. On 24 June 2026, as part of its tax simplification package, the European Commission proposed amendments to certain aspects of FASTER, including the possibility of using these procedures for certain full exemptions available under European legislation. The proposal is still under consideration and does not currently form part of the final applicable framework.
On 17 September 2026, the Court of Justice of the European Union delivered its judgment in Case C-139/25, iShares Europe ETF. The dispute concerned a US fund that had suffered 15% withholding tax on dividends from Spanish companies under the Spain-US double taxation treaty, whereas comparable Spanish collective investment undertakings were taxed at 1% on the same income.
The Court held that this difference in treatment constitutes, in principle, a restriction on the free movement of capital under Article 63 of the Treaty on the Functioning of the European Union. It also clarified that a double taxation treaty can neutralise the discrimination only where it allows the excess tax to be offset effectively and in full. The merely theoretical possibility that the fund could have elected a different tax regime allowing it to deduct the withholding tax is not sufficient.
In fiscally transparent structures, neutralisation may also occur at investor level if the investors can use the corresponding tax credit in full. It will be for the Spanish Supreme Court to determine whether such an offset was effectively obtained in the specific case.
The judgment does not grant every foreign fund an automatic refund of 14 percentage points. Each claim requires an assessment of matters including whether the non-resident fund is comparable to a Spanish collective investment undertaking, the tax treatment applicable in its state of residence and whether the withholding tax was effectively and fully neutralised. Nevertheless, the judgment strengthens the basis for reviewing certain withholding taxes suffered in Spain before FASTER becomes applicable.
For international investors, the principal expected benefit is a reduction in the period during which they bear withholding tax above the amount ultimately due.
This may be particularly relevant for institutional investors, funds, international groups and other taxpayers with significant portfolios of European securities, for whom outstanding withholding tax refunds can represent both a financing cost and a substantial administrative burden.
Simplified procedures will not, however, remove the need to substantiate the entitlement to the relevant tax treatment.
Tax residence, ownership, entitlement to a particular treaty rate or exemption, identification of the intermediaries in the payment chain and traceability of the transactions will remain essential. Claims based on European Union law may also require evidence that the non-resident investor is comparable and an analysis of whether the withholding tax was effectively neutralised in the state of residence.
The transition to FASTER may therefore make it even more important for investors and their intermediaries to maintain properly structured tax and operational information. For transparent funds, this information may extend to the treatment of dividends and tax credits at investor level.
Until the new rules apply, non-resident investors who have suffered withholding tax in Spain above the amount due must continue to use the existing procedures.
For dividends paid by Spanish companies, the applicable double taxation treaty may limit the rate of tax that Spain can impose on a non-resident investor. Where the withholding tax suffered exceeds that limit, the difference may, subject to certain conditions, be refundable. Following the iShares judgment, certain non-resident funds may also have an additional basis for claiming a refund where they have been subject to less favourable tax treatment than comparable Spanish collective investment undertakings and that difference has not been effectively and fully neutralised.
The future introduction of FASTER therefore does not mean that investors must wait until 2030 to analyse or claim excess withholding tax currently suffered.
The Directive will progressively change the way these situations are managed, but the right to request a refund under the current framework remains available.
For a practical explanation of the procedure currently applicable in Spain, please see our Guide to recovering excess withholding tax, which summarises the main routes for identifying and claiming refunds of excess withholding tax suffered on Spanish-source dividends.
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