The Path to Unlocking Unclaimed Withholding Tax Reclaims and Utilizing Relief at Source

Global investors who receive dividend and interest income paid on cross border investments are subject to a non-resident withholding tax imposed by the foreign government tax authority where the security was issued. This non-resident withholding tax may be as high as 25%-35% of the dividend and interest income.

Investors with cross-border investment income are often entitled to withhold tax refunds depending on tax residency, legal status, and the existence of double taxation treaties. Often this withholding tax can be reduced by reclaiming it from the relevant tax authorities. However, many investors do not have the knowledge or infrastructure to file for reclaims on their own. As a result, it is estimated that approximately $200 billion of withholding tax is deducted globally every year of which a material amount is left unclaimed by their beneficial owners. [1]

The process to file a tax reclaim is often arduous and lengthy. The claim must be filed with local tax authorities after the time of payment, meaning the investor would have already suffered the maximum withholding tax. Operationalizing the tax reclaims process can have the following challenges:

• No standardization across markets and lack of local subject matter expertise
• Fragmented internal processes
• Changes needing to be monitored and when identified, systems needing to be updated
• High financial risk associated with getting this wrong
• Reclaims can take a long time to process

Tax Reclaims Service for financial service providers.

We are excited to announce our partnership with GlobeTax, the industry leader in withholding tax reclaims. This collaboration will allow us to offer customers access to a market-leading service for efficiently reclaiming withholding tax on cross-border dividend income. With this combined offering, no matter which jurisdictions or regulatory obligations your business encounters, S&P Global Market Intelligence offers proven, interoperable solutions that enable you to streamline tax compliance processes and scale operations from end to end—all within a single ecosystem and platform.

The Tax Reclaims Service enables service providers, including financial intermediaries, brokers, and custodians to deliver tax reclaim services to their clients such as, investment managers, hedge funds, corporations, and pension funds, without assuming the operational burden. GlobeTax's team of leading tax experts and local tax specialists manage the process of reclaiming funds on behalf of the beneficial owners from start to finish while providing a single dashboard to monitor the lifecycle and status of the reclaim. The service offers:

• Consolidation of reclaims across multiple tax regimes.
• Access to tax subject-matter expertise and local tax experts.
• Enhancing our clients' brands with a fully white-labeled managed service.
• Monitoring the progress of tax reclaims within a single dashboard.

Global Relief at Source Service for global investors

For global investors, tax relief at source is the preferred method of reducing tax rates at the time of income payment. However, not all foreign governments have provisions for relief at source, and strict requirements may disqualify some investors from participating. Managing tax withholding rates for global clients and portfolios has become increasingly complex. The manual process has proven inefficient, especially with over 3,000 active tax treaties worldwide.

To address this challenge, S&P Global Market Intelligence has developed an automated workflow and a configurable, rules-based tax compliance engine to identify, validate, confirm, and apply optimal withholding rates across 200+ jurisdictions globally.

The Global Relief at Source Service is seamlessly integrated into our comprehensive ecosystem of tax solutions. Whether your business encounters various jurisdictions or regulatory obligations, S&P Global Market Intelligence offers proven, integrated solutions that streamline the tax compliance process. With a user-friendly dashboard, your team can easily monitor the health of your tax due diligence processes across multiple jurisdictions at a glance. Track, assign, escalate, and remediate due diligence tasks with ease. The dashboard also provides key performance indicators, including expiration campaigns, invalid form remediation, and missing documentation, giving you valuable insights into your workflow.

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S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.