• Reclaim at Source:provides tax relief at the time of the dividend and interest payment date.  As imagined, relief at source is the preferred tax reduction method for a global investor, but not all foreign governments have relief at source tax provisions, and a global investor may not qualify based on strict requirements.

A global investor who receives dividend and interest income paid on cross border investments is 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.  A paying agent withholds the non-resident tax amount and pays it to the tax authority where the investment securities were issued.  However, a global investor may qualify for a tax reduction under the provisions of a double taxation treaty between the foreign government, where the security was issued, and the government of a global investor’s country of residence. 

A double taxation treaty is the convention and covenant among foreign governments for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital gains.  A double taxation treaty contains the negotiated tax treaty rate.  This rate provides a guideline for tax relief eligibility, which averages 10% of the dividend and interest income and may occur in one of two methods:

What are Tax Reclaims?

Related Tax Reclaim Links

  • Tax Reclamation: requires a documented filing for a refund of over-withheld taxes.  This filing is usually submitted by a global custodian bank on behalf of a global investor.

Disclaimer: Vectigal is not a tax advisory company; therefore this literature should not be construed as offering tax advice.  All persons should consult with their tax and legal advisors with respect to tax issues.  Furthermore, this literature should not be taken as an offer to buy or sell any securities.

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