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How Tax Reclaims Work

Introduction

Any investor holding an international portfolio of securities will be affected by withholding taxes on their investment income. Often this withholding tax, assessed by the nation where the issuer is domiciled, is not the final tax and can be reduced by reclaiming it from the relevant foreign tax authorities.

Acupay, as a cross-border finance and international tax expert responsible for billions of tax relief, helps investors:

  • assess their reclaim potential;
  • assemble the relevant documentation for each securities market;
  • file claims with the relevant tax authorities; and
  • liaise with the relevant tax authorities, preferably in the local language.

What is withholding tax on securities?

The income paid to investors in foreign securities is subject to the tax laws of the securities’ country of origin. This means that investors’ income on cross-border investments may end up being taxed in both their country of residence and the country where the securities they hold were issued. Often this tax is applied “at source," meaning the investor will receive an income payment net of the maximum amount of withholding taxes on or around the payment date of the security. There are ways of reclaiming this excess tax from the tax authorities of the relevant jurisdictions - because they grant tax exemptions under either domestic law or double taxation treaties. The amount that can be reclaimed from the foreign tax authorities is dependent on the country of residence of the investor as well as the nature of the beneficial owner of the income.

The loss of income through overseas tax withholdings can occur on many internationally held securities ranging from shares and notes to depositary instruments thereof (ie. American Depository Receipts (ADRs)).

Acupay’s tax reclaim service

Acupay provides straightforward, easy to use, full-service tax solutions, helping the investor from start to finish. We make the process of obtaining the necessary documentation for the cross-border tax relief simple and oversee the entire process -- from filling out the correct documentation to collecting the withholding tax refunds on the investor’s behalf and depositing it into the investor’s account in the preferred currency. We continue working closely with the investor, its custodian bank(s), broker(s) and investment advisors as well as the relevant tax authorities throughout the life cycle of the tax reclaim.

Reclaims are processed in a streamlined fashion thanks to Acupay’s experience and its close relationship with financial institutions, security issuers, and tax authorities around the world. In addition, Acupay’s teams speak German, French, Spanish, Italian, Greek Russian, and Dutch, allowing us to perform detailed and accurate follow-ups of your reclaim files.

We can also reclaim on past years’ dividend and interest payments as far back as 5 years in some jurisdictions, and work with custodian banks, local custodians, paying agents and issuers to ensure interest and dividend payment at the lowest possible (at source) tax rate in the future.

Fees

Acupay’s fees for retail investors range from 5% to 10% of the tax reclaim amount, with a minimum fee of up to US $400.00 per security per reclaim.

Acupay’s fee structure for custodians, brokers, investment managers, hedge funds or pension plans is flexible and tailored to the needs of the client.

Fees are generally deducted upon receipt of funds from the foreign tax authorities. Local market fees may also apply. These conditions will be transparent and communicated beforehand.

Please contact reclaims@acupay.com for more information.