Withholding tax panel
01 Oct 2025
Industry participants explore the evolving regulatory landscape from digital tax reporting to the EU FASTER Directive, while touching upon the importance of data integrity and the powerful megatrend that is technology
Image: xy/stock.adobe.com
Panellists
Ali Kazimi
Managing Director
Hansuke Consulting
Caroline Ashkboos
Director, Optimisation and Regulatory
National Bank of Canada
Stephen Everard
CEO
TaxTec
Mariano Giralt
Head of Business Development and Strategy
Raquest
How do you anticipate the withholding tax landscape and regulatory environment evolving over the next three to five years, and what are the biggest barriers and opportunities this presents for the industry?
Stephen Everard: Over the next three to five years, the landscape is likely to become more complex, driven by an increase in cross-border investment, the likelihood of greater regulatory scrutiny, and the push for tax transparency driven by global initiatives like the Organisation for Economic Co-operation and Development’s (OECD’s) Common Reporting Standard.
Governments may well tighten compliance requirements and potentially introduce more digital tax reporting obligations or enhance their enforcement capabilities.
Barriers include the continued lack of harmonisation across jurisdictions, differences in how treaties are interpreted, and the administrative burden associated with reclaims. However, this also creates opportunities for innovative reclaim solutions such as those offered by TaxTec. Institutional investors and service providers who invest in scalable digital platforms and AI-enabled capabilities will be well-positioned to benefit from these changes.
Caroline Ashkboos: The withholding tax landscape is — and always has been — constantly evolving, however the appetite and traction for significant change has increased over the past decade due to two main contributing factors: combatting tax fraud and technology.
The EU directive — Faster and Safer Relief of Excess Withholding Taxes (FASTER) — will bring significant change over the next decade to the tax landscape globally and its various stakeholders, where agility will be key. Notwithstanding the time-efficient benefits FASTER’s tax relief processes will provide to end investors, the adoption phase will be costly (as we are seeing, by way of comparison, with the EU move to a T+1 settlement cycle), and could potentially create jurisdictional silos dependent on feasibility and risk appetite to integrate the FASTER model. For example, we have already seen Germany adopting its own fiscal regulation (MiKaDiv) introducing complex transactional reporting which will be effective in 2027, three years ahead of the EU FASTER Directive.
Increased due diligence and reporting under FASTER may also see end investors playing a more active role in the withholding tax relief management process of investment portfolios, which have traditionally been mandated to appoint financial service providers to manage on their behalf. Building investor awareness of the changes ahead is therefore important to help navigate the landscape and contribute to the success of the EU FASTER Directive’s objectives and purpose.
The question that remains is if we will see non-European jurisdictions, such as the US or certain APAC markets, take inspiration from the EU FASTER Directive, which would mean further changes ahead across the withholding tax landscape for the foreseeable future.
Ali Kazimi: Withholding tax recovery is fragmenting across jurisdictions. In Europe, administrative fallout from the cum-ex scandal has created serious delays, with claims in Germany and Denmark often stalled for years. Though the European Union’s FASTER proposal, including the standardised Digital Tax Residence Certificate (eTRC), promises procedural relief, implementation remains distant. Elsewhere, treaty access is becoming more conditional, with regulators introducing tests rooted in investor intent, not just structure. Meanwhile, asset allocators are tilting towards Asian and African markets, where fragmented treaty frameworks add new complexity. The opportunity now lies in anticipating jurisdictional friction and embedding cross-border reclaim intelligence into both product design and investment governance.
Mariano Giralt: Our expectation is that the tax regulatory environment will continue to become more complex in financial services, mainly driven by three key forces:
More local and international (e.g. EU directives) tax regulations focusing on tax reporting, which will provide additional information to tax authorities for increased scrutiny on potential tax evasion activities and tax reclaim abuses.
More digitalisation processes across tax authorities. In principle, moving paper-based documentation and reclaim processes to digital is good news.
The main challenge will continue to be the lack of harmonised digital processes across jurisdictions.
Scarcity of the tax experts. Due to the general demographic changes, tax experts will become decreasingly prominent. Therefore, it is paramount to achieve more with less.
Financial institutions that lead in implementing digital solutions, automation, and compliance will strengthen their position as trusted partners to investors.
What are the primary pain points and priorities for institutional investors when procuring tax recovery services, and how significantly does fiduciary responsibility drive demand for efficient reclaim processes?
Kazimi: The procurement of tax recovery services varies across institutional investor types but is increasingly shaped by legal risk and regulatory complexity. Insurance firms prioritise defensible structures that withstand audit and align with liability-driven models. Asset managers emphasise reclaim efficiency, velocity, and contribution to net performance.
Sovereign wealth funds and public institutions must also navigate reputational sensitivity and geopolitical exposure. This complexity has deepened with the introduction of the OECD’s Multilateral Instrument and the EU’s Unshell Directive, both of which apply purpose and substance-based tests that make treaty access less certain. Across all segments, pain points include jurisdictional inconsistency, entitlement uncertainty, and limited audit transparency.
Fiduciary duty now demands providers who not only execute claims but assess legal eligibility, flag structural vulnerabilities and deliver clarity across markets and asset classes.
Everard: The primary pain points are data integrity and quality, along with the myriad of complex documentation requirements and often long reclaim cycles.
Another significant challenge historically has been inconsistencies in reclaim success rates across different jurisdictions, though this has become less of an issue with highly automated solutions such as TaxTec’s.
Fiduciary responsibility plays a critical role in driving demand. Institutional investors, particularly pension funds and insurance companies, are increasingly expected to demonstrate they have maximised returns on behalf of their beneficiaries.
Efficient and transparent reclaim processes are becoming a hallmark of good governance and compliance with fiduciary standards.
Giralt: The primary pain points in withholding tax processing for institutional investors are operational inefficiencies and complexity: manual, paper-based processes, built-in waiting periods between process steps, and complexity in recoveries. Furthermore, knowledge transfer will be vital.
Fiduciary responsibility is, of course, a major driver: failing to optimise tax recovery entitlements can be perceived as a loss of value to clients. These demands require specialised, technology-enabled solutions.
How do financial institutions effectively balance operational scale with jurisdiction-specific expertise in delivering withholding tax services, and what role does technology — particularly AI — play in reshaping these processes?
Giralt: The balance comes from combining global scale with robust digitalised processes and local expertise and tailored domestic solutions.
Good examples are MiKaDiv (new digital German reporting requirement) and the EU FASTER Directive, which has a regional regulatory impact.
At Raquest, we believe that advanced technologies, particularly artificial intelligence, are critical to supporting automation of document validation, anomaly detection, and regulatory forecasting across multiple jurisdictions.
Ashkboos: Withholding tax relief processes have continued to evolve quite significantly over the past eight years with said evolution driving the challenge of managing individual market requirements on an operational scale, where traditional focus has been to standardise processes and maximise economies of scale.
Niche local market requirements are emphasising the need for a combination of human expertise and innovative solutions, dependent on market complexities, risk appetite, and value at stake.
Determining operating models is key to success in the withholding tax space, which may consist of identifying areas that can be managed efficiently in-house using a combination of both human capital and technology, and areas where capitalising on outsourcing opportunities to bring added value and mitigate inherent operational risks.
Technology is a powerful megatrend providing welcoming opportunities to optimise operating models; nevertheless, it is imperative to clearly understand and pinpoint where its effectiveness lies, especially in the withholding tax space where required data is often stored across various interfaces of a financial institution’s systemic infrastructure, reminding us that human capital and critical thinking is still required.
The AI part of technology is indeed reshaping the workplace and workforce, however it is important for organisations to apply effective logic to the decision making process of AI usage for optimal results (for example, data collection, repetitive tasks, basic data processing). Herein lies the concept of ‘augmented intelligence’ whereby technology and human interventions combine, creating the prospect for new future job opportunities and bridging the talent gap across the industry.
Everard: Global custodians try to manage this balance by leveraging centralised operational hubs while sometimes partnering with local tax agents for jurisdiction specific expertise rules. But it is not a core competence so they are increasingly outsourcing to specialist scalable platforms such as TaxTec, who can provide a global service focused on recovering more at lower overall cost in order to satisfy their clients.
AI and machine learning are becoming established technologies very well suited to identifying reclaim opportunities, detecting reconciliation issues, and automating document generation, therefore improving accuracy, reducing manual effort, and recovering more tax.
Which specific areas of the reclaim workflow would benefit most from automation and digital transformation, and what technological solutions are proving most effective?
Giralt: At Raquest, we believe that automating and digitising the entire withholding tax process would be beneficial. A few key areas are:
Document collection and validation, where OCR and machine learning reduce errors and prevent questions from tax authorities.
Deadline management and claim tracking, where automation prevents missed opportunities and helps get funds back faster to the final beneficial owner.
E-filing digital processes and digital transfer of tax information to tax authorities, where digitalisation can process large amounts of reclaims in short periods of time.
Interoperability with custodians and tax authorities via APIs and digital standards that eliminate duplication and speed up processes.
Tax monitoring and assurance with predictive analytics and real-time dashboards give investors complete visibility and control, helping them to predict workload peaks.
Everard: High-impact areas include eligibility validation, document management, claim form completion, and status tracking. Automation can also greatly assist with monitoring statutory deadlines and managing resubmissions. Effective solutions include intelligent workflow tools, cloud-based document repositories, and integrated dashboards that provide real-time reclaim metrics.
Ashkboos: End-to-end digitisation of the tax relief form submission process (completion, certification, submission) would be a huge benefit to all stakeholders, creating operational and cost efficiencies while mitigating operational risk. Despite the EU FASTER Directive’s objective to favour relief at source, tax reclaim mechanisms will remain for exception cases carved out of the directive. Digital investment in this area would therefore still be beneficial.
Data collection and data management remains a considerable part of withholding tax relief processes and has become inextricably linked to technological solutions. Coding is a fundamental mechanism to manage, reconcile and re-use data points from various sources and is leading to innovative solutions for reporting and governance and control purposes. The importance of data in the withholding tax relief lifecycle has very much come to the forefront over the past decade, especially with increased scrutiny from local tax authorities globally; governance and effective usage of data is therefore vital.
Know Your Client (KYC) and client-onboarding procedures have also evolved; a wider extent of tax-related information and documents are requested from the outset, and onboarding has in fact become a paramount data collection process, to the extent that the concept of Know Your Data (KYD) has evolved from KYC.
The automation of onboarding processes will largely contribute to the optimisation of tax utility functions within financial institutions.
Is there a growing appetite among institutional investors to pursue class actions as a strategy for protecting their rights and entitlements, and how material are these recoveries to overall returns?
Kazimi: Yes, institutional investors are increasingly treating class actions as an active channel for enforcing shareholder rights and capturing latent value. What was once viewed as legal housekeeping is now integrated into stewardship frameworks, with recoveries often matching or exceeding the basis-point impact of active management.
The growth of global settlement volumes — particularly in ESG-related and securities fraud cases — has underscored their materiality. As asset exposure diversifies beyond listed equities, institutions are adapting legal infrastructure to ensure they can assert claims across pooled structures, custodial chains, and digital asset holdings. Class action participation is no longer optional; it is performance-linked accountability.
Everard: Yes, there is growing interest in class actions, especially following a number of high-profile settlements and increased scrutiny by regulators of passive loss acceptance to the potential detriment of beneficiaries. Class actions are increasingly viewed as a fiduciary duty rather than an optional exercise.
Individual recoveries may be modest relative to total portfolio returns but cumulatively they can be significant. Class action recoveries also signal sound institutional stewardship and enhance investor confidence.
To what extent do asset owners and managers prioritise tax reclaim strategies as part of their performance optimisation frameworks, and are they doing enough in this regard?
Everard: Historically, tax reclamation was not considered to be an area of focus. More recently however, recovery strategies have been receiving greater attention, in large part because digital AI-enhanced platforms such as TaxTec make it significantly easier to both manage reclaims and also understand the benefit in terms of additional basis point performance. That said, there is still a significant gap between awareness and action in some areas of the market. Many asset managers have yet to integrate tax recovery comprehensively into their performance optimisation frameworks. Those that do often experience measurable gains in net performance. However, limitations in data access, internal expertise, and service provider capabilities still hold back many asset managers from optimising the performance of their funds.
Giralt: Ensuring withholding tax relief entitlements is increasingly seen as a driver of performance optimisation rather than a back office process. However, not all asset owners and asset managers are maximising the opportunity, and many still underutilise its potential due to operational complexity or limited technology adoption.
There is a clear trend in which financial institutions are recognising the importance of ensuring that the right withholding tax amount is paid and repaid, as well as the impact on the overall performance. This is prompting a greater focus on digital tax solutions for processing withholding tax and integrating tax relief analysis directly into performance frameworks.
Kazimi: Too often, tax reclaim is treated as an operational afterthought when it should be a core lever of net performance. Some investors build reclaim feasibility into fund design and jurisdictional planning. Many do not, and the cost is real. Index providers like MSCI and FTSE Russell apply different assumptions to net of tax benchmarks, yet asset managers frequently report against gross indices while delivering net outcomes. The result is hidden tax drag that quietly eats away at returns. Research from leading custodians puts the cost of poor fund structuring at up to 90 basis points a year. Academic studies link reclaim frictions to reduced foreign investment. As access to treaty benefits is increasingly tied to substance and purpose, reclaim strategy must move upstream. Getting this right means aligning fund structure, benchmark assumptions, and legal risk, not simply fixing things after the fact.
How are performance attribution models evolving to properly account for investor rights and entitlements, including tax reclamation impacts?
Kazimi: Attribution models are being rebuilt to reflect the conditional nature of entitlements. Withholding tax reclaims, once assumed to be collectable, now depend on legal interpretation, compliance evidence, and local authority behaviour.
Attribution must separate nominal entitlements from those that are legally realisable, based on structure, documentation, and jurisdictional policy. This is especially important for portfolios holding private assets or digital instruments, where rights are less standardised. Institutions must adjust their measurement frameworks to ensure reported performance reflects not only investment outcomes but also the success or failure of entitlement enforcement.
Everard: They are slowly evolving to account for the impact of rights and entitlements. Some of the more forward-thinking institutional investors are beginning to factor in gross versus net return discrepancies, especially in jurisdictions with high withholding tax rates.
Enhanced attribution tools that include tax adjustments, reclaim success rates, and timing differences are becoming more common, helping stakeholders understand the true drivers of net performance but there is still a long way to go and significant amounts of tax to reclaim across many jurisdictions around the world.
What degree of recognition do investor rights and entitlements receive as material contributors to investment returns across the institutional landscape?
Everard: Recognition is increasing, particularly among sophisticated asset owners who are benchmarking their net performance more rigorously in order to evidence they are taking their fiduciary responsibility seriously. Investor rights, especially around tax entitlements, are now more readily considered to be an integral part of the value chain, and not merely an administrative burden or afterthought as was often previously the case.
However, this is still very much work in progress. To be successful, it requires broader industry education, regulatory encouragement or insistence, and enhanced reporting. Then perhaps, investor rights and entitlements will become embedded as key components of return optimisation.
Ali Kazimi
Managing Director
Hansuke Consulting
Caroline Ashkboos
Director, Optimisation and Regulatory
National Bank of Canada
Stephen Everard
CEO
TaxTec
Mariano Giralt
Head of Business Development and Strategy
Raquest
How do you anticipate the withholding tax landscape and regulatory environment evolving over the next three to five years, and what are the biggest barriers and opportunities this presents for the industry?
Stephen Everard: Over the next three to five years, the landscape is likely to become more complex, driven by an increase in cross-border investment, the likelihood of greater regulatory scrutiny, and the push for tax transparency driven by global initiatives like the Organisation for Economic Co-operation and Development’s (OECD’s) Common Reporting Standard.
Governments may well tighten compliance requirements and potentially introduce more digital tax reporting obligations or enhance their enforcement capabilities.
Barriers include the continued lack of harmonisation across jurisdictions, differences in how treaties are interpreted, and the administrative burden associated with reclaims. However, this also creates opportunities for innovative reclaim solutions such as those offered by TaxTec. Institutional investors and service providers who invest in scalable digital platforms and AI-enabled capabilities will be well-positioned to benefit from these changes.
Caroline Ashkboos: The withholding tax landscape is — and always has been — constantly evolving, however the appetite and traction for significant change has increased over the past decade due to two main contributing factors: combatting tax fraud and technology.
The EU directive — Faster and Safer Relief of Excess Withholding Taxes (FASTER) — will bring significant change over the next decade to the tax landscape globally and its various stakeholders, where agility will be key. Notwithstanding the time-efficient benefits FASTER’s tax relief processes will provide to end investors, the adoption phase will be costly (as we are seeing, by way of comparison, with the EU move to a T+1 settlement cycle), and could potentially create jurisdictional silos dependent on feasibility and risk appetite to integrate the FASTER model. For example, we have already seen Germany adopting its own fiscal regulation (MiKaDiv) introducing complex transactional reporting which will be effective in 2027, three years ahead of the EU FASTER Directive.
Increased due diligence and reporting under FASTER may also see end investors playing a more active role in the withholding tax relief management process of investment portfolios, which have traditionally been mandated to appoint financial service providers to manage on their behalf. Building investor awareness of the changes ahead is therefore important to help navigate the landscape and contribute to the success of the EU FASTER Directive’s objectives and purpose.
The question that remains is if we will see non-European jurisdictions, such as the US or certain APAC markets, take inspiration from the EU FASTER Directive, which would mean further changes ahead across the withholding tax landscape for the foreseeable future.
Ali Kazimi: Withholding tax recovery is fragmenting across jurisdictions. In Europe, administrative fallout from the cum-ex scandal has created serious delays, with claims in Germany and Denmark often stalled for years. Though the European Union’s FASTER proposal, including the standardised Digital Tax Residence Certificate (eTRC), promises procedural relief, implementation remains distant. Elsewhere, treaty access is becoming more conditional, with regulators introducing tests rooted in investor intent, not just structure. Meanwhile, asset allocators are tilting towards Asian and African markets, where fragmented treaty frameworks add new complexity. The opportunity now lies in anticipating jurisdictional friction and embedding cross-border reclaim intelligence into both product design and investment governance.
Mariano Giralt: Our expectation is that the tax regulatory environment will continue to become more complex in financial services, mainly driven by three key forces:
More local and international (e.g. EU directives) tax regulations focusing on tax reporting, which will provide additional information to tax authorities for increased scrutiny on potential tax evasion activities and tax reclaim abuses.
More digitalisation processes across tax authorities. In principle, moving paper-based documentation and reclaim processes to digital is good news.
The main challenge will continue to be the lack of harmonised digital processes across jurisdictions.
Scarcity of the tax experts. Due to the general demographic changes, tax experts will become decreasingly prominent. Therefore, it is paramount to achieve more with less.
Financial institutions that lead in implementing digital solutions, automation, and compliance will strengthen their position as trusted partners to investors.
What are the primary pain points and priorities for institutional investors when procuring tax recovery services, and how significantly does fiduciary responsibility drive demand for efficient reclaim processes?
Kazimi: The procurement of tax recovery services varies across institutional investor types but is increasingly shaped by legal risk and regulatory complexity. Insurance firms prioritise defensible structures that withstand audit and align with liability-driven models. Asset managers emphasise reclaim efficiency, velocity, and contribution to net performance.
Sovereign wealth funds and public institutions must also navigate reputational sensitivity and geopolitical exposure. This complexity has deepened with the introduction of the OECD’s Multilateral Instrument and the EU’s Unshell Directive, both of which apply purpose and substance-based tests that make treaty access less certain. Across all segments, pain points include jurisdictional inconsistency, entitlement uncertainty, and limited audit transparency.
Fiduciary duty now demands providers who not only execute claims but assess legal eligibility, flag structural vulnerabilities and deliver clarity across markets and asset classes.
Everard: The primary pain points are data integrity and quality, along with the myriad of complex documentation requirements and often long reclaim cycles.
Another significant challenge historically has been inconsistencies in reclaim success rates across different jurisdictions, though this has become less of an issue with highly automated solutions such as TaxTec’s.
Fiduciary responsibility plays a critical role in driving demand. Institutional investors, particularly pension funds and insurance companies, are increasingly expected to demonstrate they have maximised returns on behalf of their beneficiaries.
Efficient and transparent reclaim processes are becoming a hallmark of good governance and compliance with fiduciary standards.
Giralt: The primary pain points in withholding tax processing for institutional investors are operational inefficiencies and complexity: manual, paper-based processes, built-in waiting periods between process steps, and complexity in recoveries. Furthermore, knowledge transfer will be vital.
Fiduciary responsibility is, of course, a major driver: failing to optimise tax recovery entitlements can be perceived as a loss of value to clients. These demands require specialised, technology-enabled solutions.
How do financial institutions effectively balance operational scale with jurisdiction-specific expertise in delivering withholding tax services, and what role does technology — particularly AI — play in reshaping these processes?
Giralt: The balance comes from combining global scale with robust digitalised processes and local expertise and tailored domestic solutions.
Good examples are MiKaDiv (new digital German reporting requirement) and the EU FASTER Directive, which has a regional regulatory impact.
At Raquest, we believe that advanced technologies, particularly artificial intelligence, are critical to supporting automation of document validation, anomaly detection, and regulatory forecasting across multiple jurisdictions.
Ashkboos: Withholding tax relief processes have continued to evolve quite significantly over the past eight years with said evolution driving the challenge of managing individual market requirements on an operational scale, where traditional focus has been to standardise processes and maximise economies of scale.
Niche local market requirements are emphasising the need for a combination of human expertise and innovative solutions, dependent on market complexities, risk appetite, and value at stake.
Determining operating models is key to success in the withholding tax space, which may consist of identifying areas that can be managed efficiently in-house using a combination of both human capital and technology, and areas where capitalising on outsourcing opportunities to bring added value and mitigate inherent operational risks.
Technology is a powerful megatrend providing welcoming opportunities to optimise operating models; nevertheless, it is imperative to clearly understand and pinpoint where its effectiveness lies, especially in the withholding tax space where required data is often stored across various interfaces of a financial institution’s systemic infrastructure, reminding us that human capital and critical thinking is still required.
The AI part of technology is indeed reshaping the workplace and workforce, however it is important for organisations to apply effective logic to the decision making process of AI usage for optimal results (for example, data collection, repetitive tasks, basic data processing). Herein lies the concept of ‘augmented intelligence’ whereby technology and human interventions combine, creating the prospect for new future job opportunities and bridging the talent gap across the industry.
Everard: Global custodians try to manage this balance by leveraging centralised operational hubs while sometimes partnering with local tax agents for jurisdiction specific expertise rules. But it is not a core competence so they are increasingly outsourcing to specialist scalable platforms such as TaxTec, who can provide a global service focused on recovering more at lower overall cost in order to satisfy their clients.
AI and machine learning are becoming established technologies very well suited to identifying reclaim opportunities, detecting reconciliation issues, and automating document generation, therefore improving accuracy, reducing manual effort, and recovering more tax.
Which specific areas of the reclaim workflow would benefit most from automation and digital transformation, and what technological solutions are proving most effective?
Giralt: At Raquest, we believe that automating and digitising the entire withholding tax process would be beneficial. A few key areas are:
Document collection and validation, where OCR and machine learning reduce errors and prevent questions from tax authorities.
Deadline management and claim tracking, where automation prevents missed opportunities and helps get funds back faster to the final beneficial owner.
E-filing digital processes and digital transfer of tax information to tax authorities, where digitalisation can process large amounts of reclaims in short periods of time.
Interoperability with custodians and tax authorities via APIs and digital standards that eliminate duplication and speed up processes.
Tax monitoring and assurance with predictive analytics and real-time dashboards give investors complete visibility and control, helping them to predict workload peaks.
Everard: High-impact areas include eligibility validation, document management, claim form completion, and status tracking. Automation can also greatly assist with monitoring statutory deadlines and managing resubmissions. Effective solutions include intelligent workflow tools, cloud-based document repositories, and integrated dashboards that provide real-time reclaim metrics.
Ashkboos: End-to-end digitisation of the tax relief form submission process (completion, certification, submission) would be a huge benefit to all stakeholders, creating operational and cost efficiencies while mitigating operational risk. Despite the EU FASTER Directive’s objective to favour relief at source, tax reclaim mechanisms will remain for exception cases carved out of the directive. Digital investment in this area would therefore still be beneficial.
Data collection and data management remains a considerable part of withholding tax relief processes and has become inextricably linked to technological solutions. Coding is a fundamental mechanism to manage, reconcile and re-use data points from various sources and is leading to innovative solutions for reporting and governance and control purposes. The importance of data in the withholding tax relief lifecycle has very much come to the forefront over the past decade, especially with increased scrutiny from local tax authorities globally; governance and effective usage of data is therefore vital.
Know Your Client (KYC) and client-onboarding procedures have also evolved; a wider extent of tax-related information and documents are requested from the outset, and onboarding has in fact become a paramount data collection process, to the extent that the concept of Know Your Data (KYD) has evolved from KYC.
The automation of onboarding processes will largely contribute to the optimisation of tax utility functions within financial institutions.
Is there a growing appetite among institutional investors to pursue class actions as a strategy for protecting their rights and entitlements, and how material are these recoveries to overall returns?
Kazimi: Yes, institutional investors are increasingly treating class actions as an active channel for enforcing shareholder rights and capturing latent value. What was once viewed as legal housekeeping is now integrated into stewardship frameworks, with recoveries often matching or exceeding the basis-point impact of active management.
The growth of global settlement volumes — particularly in ESG-related and securities fraud cases — has underscored their materiality. As asset exposure diversifies beyond listed equities, institutions are adapting legal infrastructure to ensure they can assert claims across pooled structures, custodial chains, and digital asset holdings. Class action participation is no longer optional; it is performance-linked accountability.
Everard: Yes, there is growing interest in class actions, especially following a number of high-profile settlements and increased scrutiny by regulators of passive loss acceptance to the potential detriment of beneficiaries. Class actions are increasingly viewed as a fiduciary duty rather than an optional exercise.
Individual recoveries may be modest relative to total portfolio returns but cumulatively they can be significant. Class action recoveries also signal sound institutional stewardship and enhance investor confidence.
To what extent do asset owners and managers prioritise tax reclaim strategies as part of their performance optimisation frameworks, and are they doing enough in this regard?
Everard: Historically, tax reclamation was not considered to be an area of focus. More recently however, recovery strategies have been receiving greater attention, in large part because digital AI-enhanced platforms such as TaxTec make it significantly easier to both manage reclaims and also understand the benefit in terms of additional basis point performance. That said, there is still a significant gap between awareness and action in some areas of the market. Many asset managers have yet to integrate tax recovery comprehensively into their performance optimisation frameworks. Those that do often experience measurable gains in net performance. However, limitations in data access, internal expertise, and service provider capabilities still hold back many asset managers from optimising the performance of their funds.
Giralt: Ensuring withholding tax relief entitlements is increasingly seen as a driver of performance optimisation rather than a back office process. However, not all asset owners and asset managers are maximising the opportunity, and many still underutilise its potential due to operational complexity or limited technology adoption.
There is a clear trend in which financial institutions are recognising the importance of ensuring that the right withholding tax amount is paid and repaid, as well as the impact on the overall performance. This is prompting a greater focus on digital tax solutions for processing withholding tax and integrating tax relief analysis directly into performance frameworks.
Kazimi: Too often, tax reclaim is treated as an operational afterthought when it should be a core lever of net performance. Some investors build reclaim feasibility into fund design and jurisdictional planning. Many do not, and the cost is real. Index providers like MSCI and FTSE Russell apply different assumptions to net of tax benchmarks, yet asset managers frequently report against gross indices while delivering net outcomes. The result is hidden tax drag that quietly eats away at returns. Research from leading custodians puts the cost of poor fund structuring at up to 90 basis points a year. Academic studies link reclaim frictions to reduced foreign investment. As access to treaty benefits is increasingly tied to substance and purpose, reclaim strategy must move upstream. Getting this right means aligning fund structure, benchmark assumptions, and legal risk, not simply fixing things after the fact.
How are performance attribution models evolving to properly account for investor rights and entitlements, including tax reclamation impacts?
Kazimi: Attribution models are being rebuilt to reflect the conditional nature of entitlements. Withholding tax reclaims, once assumed to be collectable, now depend on legal interpretation, compliance evidence, and local authority behaviour.
Attribution must separate nominal entitlements from those that are legally realisable, based on structure, documentation, and jurisdictional policy. This is especially important for portfolios holding private assets or digital instruments, where rights are less standardised. Institutions must adjust their measurement frameworks to ensure reported performance reflects not only investment outcomes but also the success or failure of entitlement enforcement.
Everard: They are slowly evolving to account for the impact of rights and entitlements. Some of the more forward-thinking institutional investors are beginning to factor in gross versus net return discrepancies, especially in jurisdictions with high withholding tax rates.
Enhanced attribution tools that include tax adjustments, reclaim success rates, and timing differences are becoming more common, helping stakeholders understand the true drivers of net performance but there is still a long way to go and significant amounts of tax to reclaim across many jurisdictions around the world.
What degree of recognition do investor rights and entitlements receive as material contributors to investment returns across the institutional landscape?
Everard: Recognition is increasing, particularly among sophisticated asset owners who are benchmarking their net performance more rigorously in order to evidence they are taking their fiduciary responsibility seriously. Investor rights, especially around tax entitlements, are now more readily considered to be an integral part of the value chain, and not merely an administrative burden or afterthought as was often previously the case.
However, this is still very much work in progress. To be successful, it requires broader industry education, regulatory encouragement or insistence, and enhanced reporting. Then perhaps, investor rights and entitlements will become embedded as key components of return optimisation.
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