Cross-border taxation is complicated at the best of times. However, harnessing the refund opportunities embodied in taxation legislation can be even more daunting for any investment firm’s finance team.
Julia Bricker, withholding tax expert and Managing Director of WTax North America, states that investors are often not recovering all available withholding tax.
If you are looking for a simple route when it comes to securing a successful withholding tax reclaim, then you should look to the experts to handle the administrative burden. Should you wish to confront this task yourself, success will depend on your depth of knowledge and endurance as the process has many steps and requires persistence.
Unfortunately, there is no fast and easy route when it comes to securing a successful withholding tax reclaim. Success depends on inherent investment knowledge and patience, as the process can take many years to be completed.
Understanding double taxation agreements, domestic legislative provisions and European Court of Justice precedents is a burdensome and complex task that is essential for reclaiming that which your investors are rightfully owed. Unfortunately, many surrender before they even start.
“Even for those who are well versed in tax claims, knowledge does not always guarantee success. The reclaim process is a long and tedious process requiring technical, complex requirements to be met,” explains Bricker.
“That is why investment firms outsource the process. They either choose to pay a consultant a fixed fee for submitting claims or they may opt to use a specialist firm like WTax which only charges on a success basis for successful reclaims.”
Bricker also states that deciding to work within a contingency fee model has major benefits. “A contingency fee model works as there is no upfront capital needed by the claimant. It is completely risk-free to the investment firm. It also incentivises the service provider to see a claim through to the very end and make sure that tax is refunded expediently because they are bearing all the risk.”
Billions of dollars in withholding tax goes unclaimed each year in the EU alone, as most recently estimated by the European Commission. The real question for any investment firm should be, how much of that lost tax belongs to our investors? Furthermore, during times of crisis and economic downturns, can any investment firms remain complacent with withholding tax recovery?
Investment firms strive to act in the best interest of their clients by maximizing returns in all facets of their investments. Bricker explains that when withholding tax refunds can add up to 0.5% added value to investment performance, it becomes the responsibility of an investment firm to see these claims through and boost returns for their clients.
Withholding tax has always attracted complexities and specialized knowledge but the need to partner with an experienced provider is especially true in the transparent fund space:
Claim options include double taxation agreement claims, domestic exemption claims, and European Court of Justice (ECJ) claims. Claiming back 100% of the tax you are rightfully owed requires consideration of all three mechanisms.
Outsourcing your withholding tax recovery to a specialist such as WTax guarantees that all three mechanisms mentioned above will be explored and that any refund potential is maximised. Ultimately, engaging with dedicated experts ensures a better quality of claims and faster, more efficient refunds.
It is important to get a sense of the success rate of withholding tax claims in the past, what your reclaim provider’s international reach is and whether they offer withholding tax recovery mechanisms such as European Court of Justice reclaims.
WTax is a withholding tax recovery specialist that provides solutions to any parties seeking to optimize their withholding tax benefits processes and capabilities. WTax attends to all the administrative, technical and practical tasks in the foreign withholding tax recovery process, providing leading solutions to unlock recovery opportunities in over 30 jurisdictions.