The European Fund and Asset Management Association (EFAMA) has urged the European Commission (EC) to not limit its Tax Omnibus proposals to pension institutions.

In response to the EC’s consultation, which will entitle pension institutions to withholding tax relief at source when receiving intra-EU dividends, EFAMA said the changes were a major step towards simplifying existing rules and eliminating double taxation on dividend payments.

While the association welcomed the proposals, it argued that the new mechanism should also be available to investment funds, such as UCITS and ELTIFs.

EFAMA said this would eliminate double taxation and avoid scenarios where the same dividend is taxed differently depending on the investment vehicle that receives it.

Additionally, the association urged the EC to change the definition of ‘pension institution’ so the new relief would cover comparable pension funds in all member states, including those in Denmark and Spain, and schemes that pool their investments through funds.

It noted that the reforms raised the ambition of the Faster and Safer Relief of Excess Withholding Taxes (FASTER) Directive, and said fast-track procedures should be kept open.

“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,” said EFAMA senior tax adviser, António Frade Correia.

“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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