Revisiting withholding taxation on passive income in international and european tax law

In today’s increasingly connected financial world, governments face an ongoing challenge: how to secure sufficient tax revenues while staying attractive to international investors. Events like the 2008 financial crisis, the COVID-19 pandemic, and the resulting economic uncertainty have intensified this dilemma and placed increasing pressure not only on public institutions but also on financial intermediaries to adapt and respond. As corporate tax revenues and also dividends decline in certain sectors, the role of investment-friendly tax systems – particularly in the area of withholding tax – becomes more significant. At the same time, stricter regulations that aim at curbing tax avoidance have made tax systems more complex and costly for financial service providers. Fund closures, evolving market strategies, and the growing demand for transparency continue to reshape the industry. Although this is frequently overlooked, withholding tax procedures play a key role in cross- border investment decisions. For instance, when investors receive dividends from a foreign source, excessive withholding tax rates or cumbersome refund procedures can reduce their returns and create administrative obstacles. An efficient and predictable system can help to avoid double taxation and make financial markets more accessible. Ultimately, this would encourage capital inward flows. Since tax authorities around the world increase their scrutiny and investors demand clearer rules, the ability to navigate withholding tax systems effectively has become an essential aspect of international investment planning and portfolio management. This thesis takes a detailed look at the international withholding tax system – its history, current developments, and where it may be heading. Through the analysis of legal changes, regulatory trends, and emerging best practices, it highlights how crucial withholding tax has become in today’s global investment environment. Hence, the thesis aims to contribute to a more efficient and fair withholding tax system that works for policymakers, investors, and tax authorities alike.