From 2030, investors in the EU can more easily reclaim excess withholding tax withheld.
Withholding tax
Investors often receive dividends on the shares in their portfolios. This dividend is subject to income tax in the investor's country of residence. Often, the company must withhold tax from the dividend in its country of residence. This tax is called withholding tax. In the Netherlands, this withholding tax is levied under the name dividend tax.
Some countries have a withholding tax not only on dividends, but also on interest and/or royalties.
Tax treaty
Most tax treaties agree that the withholding tax cannot exceed a certain percentage of the gross dividend (in almost all tax treaties entered into by the Netherlands, this is 15%). The withholding tax withheld abroad is credited against the Dutch tax (note: you have to process this yourself in your income tax return), but obviously not more than 15% of the gross dividend.
However, several countries have a higher rate for their withholding tax than the maximum agreed in the tax treaty. In that case, the tax treaty contains a procedure under which the investor can reclaim the excess withheld withholding tax from the tax authority of the relevant country. Usually, a form is prescribed for this purpose, which can be requested from the tax authorities: https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/internationaal/vermogen/teruggaaf_of_vrijstelling_van_buitenlandse_bronbelasting/formulieren.
Example
If the dividend comes from a German company, it is generally subject to 25% German withholding tax (Kapitalertragsteuer). A maximum withholding tax of 15% was also agreed in the tax treaty between the Netherlands and Germany.
The investor can credit the German withholding tax up to 15% of the gross dividend against the Dutch income tax. The remaining 10% must be reclaimed from the German Finanzamt, using the appropriate treaty form.
Editable
It goes without saying that reclaiming excess withholding tax withheld in each individual country, using the form applicable to that country (sometimes in the language of that country), is very laborious for investors. So laborious that many investors just don't bother. The European Council has reached an agreement on the European directive FASTER. This directive should make it possible to reclaim excess withholding tax via the financial institution managing the portfolio in one go. The directive must be transposed into national legislation by member states by 1 January 2028. The rules will then apply from 1 January 2030.