It has been reported that deadlock continues over the difficult issue of the proposed 20% withholding tax to be deducted by EU payers of cross border payments. The alternative, within the proposal, is for the payer to provide information to the tax authorities of the payee`s country of residence to enable those authorities to tax investors “at home”.
Both UK and Luxembourg oppose the directive. The UK would be happy with information provision – which Luxembourg would not. Luxembourg would, however, would be happy with a 10% rate of withholding tax.
Whilst unanimous voting is necessary on tax issues this topic looks set for stalemate. The proposed change also has worrying implications for all providers of products into other jurisdictions. It is hard, in the long run if this change is introduced, to see how deduction at source on certain investment types should not be extended to all investments.