The Next Decade of Withholding Tax
Insights on Geopolitics, Innovation, and Macroeconomics from the Global Withholding Tax Summit
On July 1, 2026, GlobeTax’s Len Lipton joined the opening panel of the Global Withholding Tax Summit in London. The session, “Geopolitics, Macro, and Innovation,” brought together senior leaders from across tax, custody, and advisory to examine how geopolitical shifts, macroeconomic policy, and emerging technology are reshaping the withholding tax landscape.
While the discussion touched on a range of topics, the conversation quickly focused on the European Union’s FASTER Directive and its implications for investors and financial institutions worldwide. Len opened with a quote often attributed to Bill Gates: “We tend to overestimate the change that will occur in the next two to three years and underestimate the change that will occur in the next ten.”
The remark neatly captured the panel’s core message: the industry is clearly moving toward greater standardization and digitalization, but the journey will likely be longer, more complex, and more iterative than many expect.
Below, we summarize the main takeaways from the panel and key insights from Len’s remarks.
FASTER will move the EU toward harmonization but new reporting regulation can also bring complexity
Any panel on technology and geopolitics in the withholding tax space would not be complete (or even start) without discussion of EU FASTER. An acronym for Faster and Safer Relief of Excess Withholding Taxes, the directive is designed to digitize and standardize cross-border withholding tax relief and recovery across the European continent.
Len described the directive as an important step forward, and said that incremental progress is always preferable to standing still. He noted that throughout his twenty-five years in the industry there have been ongoing discussions and working groups about harmonizing withholding tax practices and that, ironically, each time that conversation has occurred in the past the landscape has gotten more complicated. He suggests that this time is different because this is the first time the EU membership has agreed to formally adopt a framework for harmonization and that is great news.
As with any new (major) regulatory reporting regime, there will be complexity. Given the EU’s requirement for unanimous agreement to ratify tax regulation, certain compromises had to be made which are likely to increase the complexity to the firms subject to the mandatory reporting. For example, it appears that rather than a single, uniform reporting framework, Len noted that there will likely be several implementation models which will increase the complexity for financial institutions subject to the reporting obligations. That’s because Member States retain flexibility in how they adopt the directive, choosing between “Direct” and “Indirect” reporting approaches. Existing frameworks, including Germany’s MiKaDiv (effective January 2027) and TRACE (implemented by Finland in 2021 following OECD recommendations) are likely to coexist or evolve to conform to FASTER, while potentially retaining some unique features.
While the ideal destination is a single harmonized system, the near-term reality looks more like several systems that intermediaries (and investors) will need to navigate simultaneously.
Technology – Not Policy – May Be the Biggest Challenge
According to Len, one of the most underappreciated dimensions of FASTER is the technology investment required to support the directive.
He quipped that even though basic smartphones are more powerful than the computers that took humans to the moon, major custodians and financial institutions still rely on decades-old technology platforms to manage their tax and custody operations. Data is often fragmented across legacy systems, requiring extensive API communication and manual intervention before it can be reported consistently.
And, for all the promise that AI brings, it is not a panacea. AI models depend on clean, standardized data, and most of the industry just isn’t there yet. His core message was that, while progress is undoubtedly happening, significant investment in data architecture will be required before FASTER can operate as envisioned.
FASTER’s Impact Extends Well Beyond Europe
Although FASTER is an EU directive, its impact will undoubtedly be global.
Any institution holding securities issued in participating European markets will be subject to new reporting requirements, regardless of where that institution is located.
For large US institutions, this represents an entirely new set of reporting requirements. Relief at source only functions if reporting happens first. Even traditional reclaim processes will depend on tax authorities having access to standardized reporting data to validate claims. As a result, firms around the world will need to reconfigure their operations, technology, and compliance processes well before the directive takes effect.
Tax Residency Certificates Are Going Digital – At Least for the EU
The certificate of residency represents a further point of evolution.
Although many jurisdictions still rely on a paper-based, manual application and certification process, FASTER envisions a common electronic (EU) Tax Residency Certificate (eTRC). This will be a tremendous step forward, but only within the EU.
For example, the US residency certification (the IRS Form 6166) remains a physical form, and Len expressed skepticism that the IRS is moving to a digital equivalent in the near-term.
This creates a significant gap. The US-to-EU corridor is one of the largest in the world, with something on the order of ten trillion dollars of foreign capital holding securities in European markets. To achieve its full potential, a relief system built on EU-native credentials still has to serve everyone who sits outside them. He expressed hope that the EU would continue to accommodate Residency Certificates from outside of the EU that do not (yet) conform to the new electronic model.
A Familiar Story for Veterans of QI and FATCA
For anyone who lived through QI and FATCA, Len noted, the shape of FASTER feels familiar. Though the back-office data sits in similar places, the filing and reporting requirements differ. And unfortunately, the US and EU legal systems don’t line up cleanly even when they rest on similar principles.
As a result, FASTER becomes another layer atop two decades of existing compliance obligations. Smaller custodians in particular need to weigh the technology cost and liability of acting as a certified financial intermediary (CFI) against the business risk of not reporting and limiting their clients’ ability to get relief.
Where it Leaves Us
Despite these challenges, Len ultimately concluded on an optimistic note.
The pace of change in withholding tax is accelerating, and investor interest has never been greater. The size of the crowd in the room, he suggested, is a sign that withholding tax is finally getting the attention it has long deserved, and is being recognized as a strategic issue rather than a back office afterthought.
The underlying objectives remain straightforward. Investors want their legal entitlements in a frictionless way. Tax-authorities want to protect their treasuries. And the financial industry just wants to operate within a predictable and efficient framework.
These are all reasonable goals. Achieving them simultaneously, however, will require continued collaboration among regulators, tax authorities, technology providers, custodians, and market participants to build the infrastructure, standards, and partnerships needed for a truly modern withholding tax ecosystem.