This book provides a clear and concise explanation of withholding tax and how to leverage best practice to generate improved investment performance. It gives practical guidance to financial service firms and investors to help them understand the issues involved, trends and practicalities of maximizing returns on investment.
Most of the $200 billion of withholding tax lost by investors annually is due to lack of awareness and not asking the right questions of their brokers and custodian banks. Financial institutions are also increasingly being held to a higher standard by investors for provision of withholding tax services because of the impact it can have on portfolio performance. This book seeks to raise awareness of the issues and provide more detail about how the system works and what challenges and changes readers should expect in the future.
Author(s): Ross K. McGill
Series: Finance and Capital Markets Series
Edition: 2
Publisher: Palgrave Macmillan
Year: 2023
Language: English
Pages: 404
City: London
Foreword
Preface to the Second Edition
Acknowledgements
About This Book
Contents
About the Author
Abbreviations
List of Exhibits
Part I Essentials
1 Introduction
2 Principles
Double Tax Principle
Jurisdictional Principle
Transparency Principle
Process and Procedure Principles
Automation Principles
Principle of Interests
Issuers
Intermediaries
Advisors
Vendors
Investors
Tax Administrations
3 Context
Materiality
Commercial
Geopolitical
Technology
Why Should We Care?
Non-Treaty Based Entitlements
Process and Procedure
Documentation and Forms
Proof of Income
Corporate Governance
4 Variability
Documentation
Relationship
Treaty
Status
Residency
Authority
Validity
Statutes of Limitation
Year of Income
Types of Income
Pro Rata Temporis
Original Issue Discount (OID)
Forms
Recovery Time
Tax Information Reporting and Audit Oversight
5 The Pace of Change
Part II Operational Models
6 Tax Relief at Source
7 Quick Refunds
8 Standard Refunds
ECJ Claims
Beneficial Owners
Financial Instruments
The Role of Sub-Custodians
The Role of Investors
Certifying Residency
Responsibility for Accuracy
Service Level Agreements
The Role of Tax Authorities
Proof of Tax Residency
Sources of Reclaim Forms
Receipt and Assessment of Reclaims
Proof of Identity
Proof of Sufferance of Double Tax
Powers of Attorney
Benchmarking
Validity
Establishing Validity
Calculating Value
Filling in Forms
Getting Local Tax Authority Approval
Filing to Foreign Tax Authorities
The Role of Sub Custodians
Chasing for Payment
Refund Payments
Crediting Client Accounts
9 Reporting
10 Governance and Enforcement
Part III Practical Implementations
11 United States of America
Documentation
Withholding
Deposits
Reporting
NQIs
Governance
12 871(m), 1446(a) and 1446(f) Withholding
871(m)
CEDEARs
1446(a) and 1446(f)
Operating Model Options
Withholding QI
Non-Withholding QI
13 EU Withholding Tax Code of Conduct
The Code of Conduct
14 OECD Tax Relief and Compliance Enhancement
15 Finland
Part IV Impacts of Tax Evasion and Fraud
16 FATCA
17 AEoI/Common Reporting Standard
18 DAC6
Causes
Purpose
Intermediaries
Legal Professional Privilege
Hallmarks
Framework
19 Tax Fraud
Denmark
Germany
Part V Technology
20 ISO Standards
ISO15022 & ISO20022
XBRL
21 Platforms
ESP®
MIDAS®
Tax Compliance Toolkit™
Investor Self Declarations™
Adroit™
22 Getting Rid of Paper
Cost
23 Withholding Tax on the Blockchain
Part VI Performance
24 Benchmarking
Eurobonds
Process Efficiency
Risk Management Benchmarks
Proportion of Fails (PF)
Age Debt Performance (ADP)
Fit (F)
Statute Risk (SR)
RAS Efficient (RAS)
PoA Index
Reconciliation and Traceability (RT)
Backlogs (B)
Capacity (C)
Cost Per Reclaim
Reclaim Rate
Cost Benefit (CB)
Threshold Index (TH)
Contractual Tax Index (CTI)
VeV Index
25 Portfolio Performance
Contractual Tax
Fiduciary Duty
26 Tax Is a Product, Not a Task
Part VII The Future
27 Digitisation of Tax
28 Vendor Dynamics
How Can Software Help and What Does It Need to Do?
Outsourcing or In-House?
Digital Processing and Interfaces
Challenges for SW Solutions and Approaches
Differences Small/Large Bank When Using a Software Solution
Smaller Financial Institutions with a Smaller Relevant Customer Base
Larger (International) Financial Institutions with a Large Relevant Customer Base
29 Future of Tax Reclamation
ADRs
Fractional Shares
Taxation of Gains
What Does the Future Look Like?
30 Conclusions
Appendices
Appendix 1: Tax Barriers Business Advisory Group Report 2013
Appendix 2: European Union Withholding Tax Code of Conduct
Introduction
Nature and Scope of the Code
Background and Context
Entitlement to Submit Refund Claims or Apply for Relief
Description
Problems It Can Address
Possible Ways to Get There
Efficient and User-Friendly Digital WHT Procedures
Description
Efficient Internal IT Systems
Problems It Can Address
Possible Ways to Get There
Problems It Can Address
Possible Ways to Get There
Effective Reliefs and Provision of Refunds in a Short Period
Description
User-Friendly Forms
Problems It Can Address
Possible Ways to Get There
Problems It Can Address
Possible Ways to Get There
User-Friendly Documentation Requirements
Description
Problems It Can Address
Possible Ways to Get There
Set Up a Single Point of Contact
Description
Problems It Can Address
Possible Ways to Get There
Relief at Source
Description
Problems It Can Address
Possible Ways to Get There
Follow-Up
Appendix 4: List of AIs for Finland TRACE Framework
Index
