Withholding nothing
18 Mar 2026
Industry experts explore how automation, regulatory reform, and evolving compliance demands are reshaping cross-border dividend tax recovery and investor outcomes
Image: xy/stock.adobe.com
How are you using automation and AI to help clients navigate the varying withholding tax rates across different treaty jurisdictions?
Julia Bricker: We embed AI into our proprietary rules engine to ensure that we always select the most preferential rate of recovery available to a client, while also prioritising the shortest possible refund timelines. This incorporates treaty rates, domestic exemptions, case law, claimant structure and filing mechanics to determine the optimal recovery path.
Beyond rate selection, we use AI extensively across document completion, document validation and reconciliation as well as automated error and exception handling. This drastically improves processing speed and materially reduces the risks associated with manual intervention, particularly in high volume environments.
We also use AI to source and analyse publicly available information and documentation, validating client responses against authoritative public sources to enhance our risk and control framework and identify anomalies early in the process. In addition, AI supports transaction-level screening, helping us identify suspicious transactions and exclude transactions that are not eligible for relief. Together, these applications strengthen both recovery outcomes and compliance integrity.
Sarah Webb: Our use of automation is deliberately practical. The challenge in withholding tax (WHT) is not so much a lack of intelligence, but inconsistencies in how treaty rules are applied across markets. We focus on automation that applies entitlement logic in a repeatable way at scale, reducing reliance on error-prone manual intervention. AI tools are used to identify data inconsistencies or documentation gaps that would otherwise lead to incorrect withholding. The objective is not to introduce AI decision-making, but to reduce operational risk and improve investment outcomes. This approach allows clients to manage complex cross-border portfolios more effectively while minimising what they leave on the table.
Roann Hautus: CACEIS leverages robotic process automation (RPA) and AI to offer a more robust and faster tax reclaim process as timing and accuracy are key — statutes of limitation being the main cause of irreversible tax losses. AI-driven deadline monitoring and automated workflows ensure claims are identified, prepared, and filed ahead of cut-offs, significantly reducing expiration risk. Ultimately, our use of AI is about protecting investor value, minimising tax drag, and delivering more efficient, technology-enabled custody services.
We are currently trialling AI-powered real-time monitoring of international tax rate and regulation changes to enable us to react faster and push out rapid alerts to clients. We are also testing AI tech in automated withholding tax calculation to identify client residency, asset type, issuing jurisdiction and any relevant bilateral tax treaties. Such tech will lighten the administrative burden and provide insightful proposals to assist investment or tax advisors. However, it will assist our tax experts rather than replace them — an assistant, completing forms and streamlining refund processing by facilitating reconciliations.
Mark Friedman: At Global Tax Recovery, we use automation and AI to simplify one of the most fragmented challenges in cross-border investing: achieving the correct withholding tax outcome across multiple treaty jurisdictions. Servicing clients with over US$5 trillion in assets under management across 20+ jurisdictions, we have built the operational depth to handle this complexity at scale. Through DiviBack, we digitise and securely reuse client documentation, connect dividend events to treaty entitlements, and automate validations, reconciliations and exception handling in real time.
AI strengthens that process by extracting and cross-checking data, monitoring regulatory developments and identifying cases that require immediate attention, while our specialists retain oversight of complex market-specific issues. For clients, that means less administrative burden, lower tax leakage, greater transparency and a scalable, audit-ready service that is already aligned with the market’s move toward digital relief frameworks such as OECD TRACE and the EU’s FASTER initiative.
Len Lipton: Automation is absolutely central to our operating model. We file more than 20 million claims annually, a scale that would just not be possible without highly automated infrastructure.
As one example, we recently launched a product called ESP+, which digitises tax rates and documentation requirements and links them to specific income events through the Corporate Action ID. This functionality allows clients to automatically determine beneficial owner eligibility for each American depository receipt (ADR) income event. Clients can also submit ADR claims directly through system-to-system communication — either API-driven or via secure file transfer protocol (SFTP) — rather than manually uploading claims through a portal.
With respect to artificial intelligence, we are taking a deliberate and methodical approach. At present, we are mainly using AI to augment internal functions such as research, software development, data analytics, and DevOps. While we are excited about emerging AI use cases, we are also cautious in their deployment, particularly given our commitment to maintaining the highest standards of client data security and confidentiality.
What specific technological innovations have you implemented to address the challenges posed by the EU’s FASTER Directive, and what operational efficiencies are clients seeing?
Webb: FASTER is fundamentally an infrastructure challenge. Our technology supports standardised data exchange, automated entitlement assessment and clear audit across markets, which are central to what the Directive seeks to achieve. We have prioritised scalable processes that can adapt to local market implementation. TaxTec clients experience lower rates of manual processing, fewer reconciliation breaks and improved certainty around relief and reclaim outcomes. The benefit is not simply speed, but lower cost and increased control: firms can evidence compliance and decision-making in a way that satisfies both regulatory expectations and fiduciary responsibilities.
Bricker: The FASTER Directive will come into effect in January 2030, and EU Member States have until the end of December 2028 to transpose it into national legislation. This means there is still meaningful structural uncertainty around how individual jurisdictions will implement the Directive in practice.
Against that backdrop, we are proactively building infrastructure to support custodial clients in meeting their anticipated obligations. This includes automated reporting frameworks and the use of sophisticated AI to assist with validations relating to beneficial ownership entitlement, eligibility for reduced rates of tax, and identifying transactions where there may be a risk of an unacceptable financial arrangement. We are also leveraging automated document validation processes that already exist across our business to ensure scalability once new requirements are finalised.
Separately, there remains uncertainty around how liability will operate for Certified Financial Intermediaries (CFIs) and how final reporting frameworks will be structured. While the Directive aims to introduce a more efficient and unified relief process, including electronic certificates of tax residence, these open questions require institutions to build systems that are flexible and defensible. Our focus is therefore not only on automation, but on ensuring that our controls framework is robust enough to operate under evolving interpretations and potential liability shifts.
Hautus: FASTER aims to combat the lack of tax authority harmonisation in communications and data transmission with digital tax residence certificates (CRFN) and registers of CFIs, streamlining stakeholder identification for taxation and WHT repayments.
Its digital reports will streamline data transmission, raising auditability of the payment chain, simplifying end-investor identity and permitting automated matching of WHT recovery requests with relevant financial flows. Short-term benefits for clients include significantly shorter repayment times, reduced operational risk and higher service quality.
We are developing automated workflows to streamline data collection and validation, minimising client involvement. Our innovative semi-autonomous e-TRC management pre-fills required forms with client data, leaving only validation to be performed. Additional enhancements include automated eligibility checks, real-time dashboards, standardised data layers and embedded compliance controls. Clients benefit from reduced administrative burdens, faster processing of relief-at-source or refund claims, reduced error rates and full audit traceability. By industrialising FASTER-related processes, investment fund compliance is efficient and secure, allowing our asset managers to focus on portfolio management and generating investor value.
Friedman: Global Tax Recovery has invested in a FASTER-ready digital withholding tax platform that turns regulatory changes into a simpler, faster and more controlled client experience. We automate data capture and standardisation across custodians, use AI-enabled controls to validate tax residence, treaty entitlement and supporting documentation, and connect client records to digital eTRC, certified intermediary reporting and electronic filing workflows. For clients, that creates a cleaner path to relief at source and quick refunds, with fewer manual touchpoints, fewer exceptions and full audit-ready transparency across the reclaim lifecycle.
Our monitoring tools give operations teams real-time visibility over every key deadline, helping them stay ahead of reporting and repayment milestones. The result is faster onboarding, higher straight-through processing and lower operational risk.
Lipton: FASTER is poised to introduce a substantial expansion of reporting obligations, and financial intermediaries will bear significant responsibility for facilitating those data flows.
The required infrastructure is quite similar to what we already support through our ESP platform — managing requirements, validating data, and transmitting documentation through the custody chain to provide tax authorities with full transparency to the ultimate beneficial owner.
We will be prepared to deploy FASTER solutions as soon as they are codified. At this stage, however, the Directive’s technical specifications continue to evolve and are not yet fully codified by the EU and individual jurisdictions. To be sure, we’ve been active contributors to the industry working groups responsible for developing both the general administrative framework and technical standards like file format specifications. Given the insights we have gleaned from participation, we feel we are well-positioned to respond as the regulatory framework reaches maturity.
With digital tax reporting requirements intensifying globally, how do platforms handle real-time withholding tax calculations and documentation for cross-border portfolios?
Bricker: We operate a completely bespoke rules engine built in-house, which uses complex algorithms that combine the legal structure of the claimant, available relief and recovery opportunities, statutory timelines for both relief at source and reclaim, and the unique documentation requirements of each jurisdiction.
Because changes in withholding tax legislation and administrative practice are constant, the system is continuously monitored and updated by our expert tax technical team. This oversight is supported by subscriptions to specialist publications, direct relationships with tax authorities who proactively share updates and AI-driven monitoring tools that assist in identifying changes and anomalies.
The combination of structured technical expertise and automation allows us to manage real-time withholding tax calculations and documentation requirements at scale, while maintaining accuracy, auditability and compliance across cross-border portfolios.
Webb: Real-time calculation is only valuable if it is supported by robust entitlement logic and reliable data. Our approach prioritises an accurate assessment of withholding tax treatment, aligned with validated documentation and transparent workflows. To our way of thinking, platforms must ensure that tax calculations are directly linked to investor data, rather than treated as a standalone function. As reporting obligations increase, the ability to evidence how a tax outcome was reached becomes critical. At TaxTec, our focus is on building resilient, automated and auditable processes that operate consistently across jurisdictions.
Hautus: The most advanced platforms are built on technology capable of quickly determining the applicable withholding tax rate for each transaction, based on the issuer’s jurisdiction, the investor’s tax status, and applicable bilateral tax treaties. They combine several continuously verified data points: tax treaties, Know Your Customer (KYC) and tax residency information for investors, as well as reports on interest, dividends, and securities events.
Beyond proper data management, it is also essential to provide our clients with a clear overview of the status of the procedures we undertake on their behalf. The tax platform we are developing, which will be available to all our clients in a few weeks, will provide this transparency, automatically manage documentation, and facilitate ongoing communication between our tax specialists and our clients.
Friedman: At Global Tax Recovery, real-time withholding tax management means combining advanced technology with disciplined operational oversight to calculate and support the correct rate at the point of payment, rather than recover it months later through costly remediation. Our platform continuously ingests custody, corporate action, and beneficial owner data across cross-border portfolios, reconciles it into a single validated record, and applies treaty and domestic tax rules through version-controlled logic and automated documentation workflows.
We also digitise the collection, validation and secure delivery of the supporting evidence required for relief at source, quick refund and evolving digital reporting obligations. For clients, that translates into lower tax leakage, faster processing, full audit visibility, and the confidence that specialist tax professionals are managing exceptions before they become delays, rejections, or lost value. And because we operate on a no-recovery, no-fee basis, clients can pursue every legitimate entitlement without taking on cost risk.
Lipton: Over three decades of experience in this space have reinforced that rapid and unexpected change is the norm rather than the exception. Our systems and teams are built to adapt quickly to evolving market conditions.
Our proprietary rates and rules engines are continuously updated through a combination of internal research, engagement with industry and regulatory networks, and operational feedback generated from the high volumes we process.
This ‘change native’ mindset is what allows us to process over 20 million claim applications each year. We are designed for flexibility and scale.
Given the persistent issue of over-withheld taxes on cross-border investments, what do you see as the main obstacles preventing more investors from successfully reclaiming their entitlements?
Caroline Ashkboos: There are several entry barriers for investors seeking withholding tax relief on global investments. Intermediaries within the reclaim chain establish at the outset a minimum reclaim amount. Considering intermediary banks may have sizeable investor volumes but modest investment portfolios, investors are immediately penalised.
Fragmented procedures, coupled with varying tax documentation requirements constantly evolving, frustrate investors; notwithstanding our technologically advanced era, the administrative burden of tax reclaims is real leading to investors renouncing tax reclaim entitlements.
Transparent entities are often requested by certain jurisdictions to provide ultimate beneficial owner (UBO) information. Gathering the information is a heavily administrative aspect of the process however considerations must also turn to independent jurisdictional data protection laws, especially outside of Europe, as this may impact the likelihood of UBO disclosure ultimately impacting the success of an entitled reclaim.
Webb: Over-withholding persists because the reclaim process remains fragmented, manual and operationally fragile. Inconsistent documentation standards, varying market practices and long settlement timelines discourage investors from pursuing their legitimate entitlements. The issue is not investor awareness, but a lack of scalable infrastructure to manage reclaims efficiently. Without standardisation and automation, the cost and uncertainty of tax reclamation could often outweigh the benefits. As a result, over-withholding continues to be treated as an accepted friction rather than a solvable operational problem. One of the key reasons I founded TaxTec is to reduce that friction wherever possible, providing institutional investors and their service providers with a high quality operations and service model which solves the problem.
Hautus: Most countries have proprietary reimbursement procedures, forms, deadlines, and documentation requirements — and expertise in this complex area is rare and expensive.
Authorities also require strict proof of tax residency, beneficial ownership of securities, and eligibility for bilateral tax treaties. Gathering and certifying this information with multiple custodians and counterparties is an underestimated administrative burden and also costly so it is often only viable to reclaim substantial amounts. Furthermore, many investors are simply unaware that they are entitled to a reimbursement or underestimate the amounts involved, which is where a service provider can add value.
In some jurisdictions, reclaim procedures can extend over several years, generating a significant opportunity cost, which is compounded when paying procedure costs upfront. By standardising and digitising, FASTER aims to reduce such barriers, however its success depends on coordination between Member States, financial intermediaries, and issuers.
Bricker: The environment is becoming more complex, not simpler. Tax authorities such as those in Norway and Germany are placing increased focus on transactions around dividend ex-dates, which directly affects eligibility for relief. Investors are increasingly required to provide granular trade data and demonstrate the economic substance of their holdings, information that is not always straightforward to obtain retrospectively.
At the same time, the concept of beneficial ownership remains inconsistently defined across jurisdictions and has similarly not been clearly addressed by the FASTER Directive. This lack of clarity increases interpretive risk.
Overlaying this is a broader increase in the burden of proof placed on investors, while tax authority resources remain constrained. The result is more queries, longer claim processing timelines and greater operational friction. Successfully reclaiming entitlements now requires both technical depth and strong process management.
Ali Kazimi: The fundamental barrier preventing investors from reclaiming their entitlement is the complexity of the reclaim infrastructure. Each jurisdiction applies different forms, documentation standards and evidentiary thresholds, which makes cross-border portfolios administratively demanding to manage. Following the Cum-Ex investigations, tax authorities have also become far more cautious when reviewing refund claims, applying stricter scrutiny to investor entitlement and treaty eligibility, often alongside broader anti-abuse considerations.
Processing timelines can extend for years as custodians respond to increasing query volumes and differing treaty interpretations. For smaller investors, the administrative burden can outweigh the expected recovery. At WTS Hansuke, we emphasise that successful reclaim programmes now depend on strong documentation prepared well before a claim is filed, clear custody chain transparency, and the operational capacity to respond efficiently to authority queries.
Friedman: The obstacles are both structural and behavioural. Structurally, every jurisdiction has its own filing requirements, documentation standards, language requirements and processing timelines, creating a maze that most investors simply do not have the in-house expertise to navigate. Behaviourally, many investors still view withholding tax recovery as a low-priority administrative task rather than a meaningful source of portfolio value, despite the fact that effective reclamation can enhance dividend yield by as much as 60 per cent for first-time claimants.
There is also a concern that the cost of recovery outweighs the benefit. At Global Tax Recovery, we have addressed that directly through our no-recovery, no-fee model: if we cannot recover, the client pays nothing. Combined with our proprietary DiviBack platform, our network of specialists across 40+ jurisdictions, and recovery speeds that are significantly faster than the industry norm, we remove the operational, financial, and knowledge barriers that have historically kept investors from pursuing what is rightfully theirs.
Lipton: The most significant obstacle is the complexity of the custody chain and the challenge of sourcing accurate, complete information across each link. Each jurisdiction imposes its own documentation and data requirements, and there is little consistency from market to market. In a number of cases, sub-custodians operating within the same market maintain different documentation requirements.
For standard refund claims, particular challenges include verifying eligible positions, which can take months rather than weeks, and the lack of two-way communication with the tax authorities regarding claim status. Tax authorities are also requiring more information and validations for standard refunds, slowing the process further.
Beyond these logistical challenges, there is a very real risk of liability. Many intermediaries are simply unwilling to take on the risk these processes carry, which further constrains investors from securing the data and validation needed to access to their entitlements.
How are recent regulatory developments in Europe affecting North American investors’ approach to European equity holdings?
Ashkboos: 2027 will see Europe’s first tax regulatory reporting become effective under Germany’s MiKaDiv Legislation. Mandatory transaction reporting at investor level will be required as a pre-validation tool for the German Tax Administration to validate investors’ eligibility to submit withholding tax reclaims. Investors will be fully dependent on its chain of financial institutions to comply with the reporting requirements; failure to do so may result in entitled reclaim opportunities foregone.
Notwithstanding increased compliance costs for financial intermediaries (systemic infrastructures, continuous monitoring capabilities), as the regulatory landscape evolves investors may also bear the cost of recalibrating portfolios due to market complexities which do not meet the risk-versus-reward principle.
Kazimi: North American investors increasingly embed tax recoverability directly into European equity portfolio construction. Increased scrutiny of dividend-related trading activity, combined with upcoming reforms such as Germany’s MiKaDiv regime and the EU’s FASTER Directive, will significantly increase transparency across custody chains, including omnibus structures common in global custody.
In response, institutions are prioritising treaty-resilient holding structures, strengthening beneficial ownership documentation and centralising reclaim management earlier in the investment process. We see investors treating Europe less as a simple yield opportunity and more as a compliance discipline: allocating selectively to markets with predictable reclaim processes while integrating tax recoverability into portfolio design from the outset.
Webb: North American investors are paying closer attention to withholding tax leakage in European markets. Increased regulatory scrutiny and initiatives such as FASTER are highlighting the cost of passive approaches to withholding tax. Investors are increasingly focused on whether their service providers can deliver efficient and effective reclaim outcomes. This is driving a shift toward greater transparency, predictability and governance in tax processing. From our perspective, this reflects a broader move towards optimisation and operational robustness as key drivers of improved investment outcomes.
Bricker: One of the main developments investors are grappling with is the request for additional information regarding share trading around dividend ex-dates. Many European countries are requesting this data, but with differing holding period requirements and no consistent definition of beneficial ownership, which materially increases complexity.
In practice, this has translated into delayed filings as investors pause to gather additional transaction-level data and reconcile trading activity around dividend ex-dates before submitting claims. The need to provide more granular information has also reduced predictability around claim status, as filings become conditional on supplementary disclosures and subject to extended review cycles.
At the same time, it has become more difficult for investors to accurately assess withholding tax leakage. When eligibility depends on nuanced holding period analysis and evolving interpretations of beneficial ownership, the true recoverable amount is harder to quantify upfront. This has all resulted in a marked increase in documentation requirements and tax authority queries, which lengthen processing timelines and introduce greater operational uncertainty into the reclaim cycle.
For North American investors, this means that European equity exposure now carries a materially higher compliance and oversight burden, requiring more active management of the reclaim process.
Hautus: We are seeing North American investors adapt their operational infrastructure to meet FASTER, MiFID II, and ESG reporting and transparency obligations, which incurs significant compliance costs, possibly discouraging investment in Europe. However, it also presents an opportunity to differentiate your investment prowess by leveraging analytical capabilities and resources that only large players can afford. FASTER is welcomed as it seeks to simplify and accelerate WHT reclaim on European dividends. And for large North American funds, WHT reclaims can be considerable, increasing the attractiveness of investment in Europe.
Friedman: Recent regulatory developments are making North American investors treat European equity exposure as an operational discipline, not simply an allocation decision. FASTER is accelerating the shift toward standardised digital tax-residence evidence and faster withholding-tax relief, while Europe’s move to T+1 is forcing investors to tighten trade matching, beneficial owner validation, cash, and FX funding, and exception management much earlier in the process.
In practice, investors are demanding more automation, stronger audit trails, and service partners who can protect dividend entitlements without creating friction in the custody chain. At Global Tax Recovery, we see the most prepared clients digitising entitlement data upfront and using API-connected workflows to deliver faster recovery, better transparency, and greater control across post-trade and tax operations. As an authorised IRS Certifying Acceptance Agent, we also simplify the US documentation process for non-resident investors, removing one of the most common friction points in cross-border tax recovery.
Lipton: From our vantage, FASTER does not yet appear to be materially influencing how North American investors are sizing or structuring their European equity exposure. Although we are tax processing experts rather than investment professionals, the shifts toward Europe we have observed seem more attributable to macroeconomic factors like exchange rates and other market dynamics that have made European equities more attractive of late.
At the moment, we are not seeing evidence that regulatory developments are influencing holding period decisions or anything like that, though that calculus may shift as FASTER implementation progresses
With several European jurisdictions facing legal challenges over dividend tax practices, how should custodians and asset servicers be adjusting their fiduciary obligations and operational processes?
Bricker: There is a clear need to bring AI into the core of operational processes and to integrate systems used for tax, anti-money laundering (AML) and KYC. When these datasets are connected, AI can reuse verified investor identity and risk signals across workflows to automate entitlement checks, strengthen control frameworks and reduce duplicative reviews and false positives.
The risk and burden on financial intermediaries are increasing, particularly around due diligence of investor entitlement. Fragmented systems amplify this risk by creating data silos and inconsistencies across functions, which expose institutions to regulatory and reputational risk.
Custodians and asset servicers should therefore focus on integrated data environments and automated validation controls that connect investor onboarding information directly with tax entitlement assessments. A unified, technology-enabled approach reduces operational friction while materially lowering fiduciary exposure.
Kazimi: Custodians and asset servicers are facing an expansion of their fiduciary responsibilities as dividend tax litigation and new transparency frameworks shift greater accountability toward financial intermediaries. Germany’s MiKaDiv regime from 2027 and the EU’s FASTER Directive that is due to apply later this decade, introduce onerous reporting obligations for certified intermediaries, and significantly increase visibility across custody chains.
For custodians and asset servicers, this means fiduciary duty now extends beyond the mechanical processing of withholding tax claims. While investor representations and tax certifications remain important, intermediaries can no longer rely on them without scrutiny. Similar to AML/KYC frameworks, custodians are increasingly expected to apply a ‘reason to know’ standard: verifying that ownership information, transaction reporting, and eligibility data are consistent across the custody chain and investigating where red flags arise.
In practice, fiduciary obligations increasingly require stronger governance, verification controls and audit-ready documentation around tax reporting processes. Institutions that can demonstrate reliable oversight and clear evidentiary standards will be better positioned as regulatory scrutiny of dividend withholding tax practices continues to intensify.
Hautus: Recent legal disputes in several European jurisdictions place custodians and asset service providers in a position of increased responsibility. Custodians must now adopt a more vigilant and informative approach toward their clients, who demand more and better information. Enhanced legal monitoring and a review of past events should enable them to clearly map the jurisdictions exposed to legal challenges. This, combined with a precise analysis of client portfolios, allows for better targeting of local problem alerts.
Webb: Legal challenges have underscored that withholding tax processing is not purely administrative. Custodians and asset servicers need to demonstrate that tax outcomes are the result of controlled, well-governed processes. This requires the elimination of manual processes and investment in modern automated systems. Fiduciary responsibility increasingly extends to how tax risk is managed operationally. Custodians and asset servicers that invest in robust, transparent processes will be better positioned to respond to regulatory scrutiny and evolving client expectations.
Friedman: With several European jurisdictions facing legal scrutiny over dividend tax practices, custodians, and asset servicers need to elevate withholding tax from an administrative function to a core fiduciary obligation. That means applying stronger eligibility controls before payment, validating beneficial ownership with precision, and maintaining a fully auditable record for every tax rate applied and every reclaim submitted.
The real differentiator, however, is technology: firms should be using rules-based engines, automated exception workflows and digital client portals to reduce risk, accelerate recovery and give investors complete transparency over status and exposure. In this environment, clients are not looking for manual processing; they are looking for a partner that can combine transparency, governance, automation and service excellence to protect returns and deliver confidence at scale. That is precisely the model we have built at Global Tax Recovery, and the results speak for themselves: faster recoveries, complete audit trails, and a client base that includes some of the world’s largest financial institutions.
Lipton: This relates to European Court of Justice cases and the decisions and appeals that are slowly but persistently winding through courts.
Our view is that until the underlying laws are changed in these jurisdictions, it is difficult for custodians and asset servicers to update their fiduciary obligations or operational processes. The legal framework justifying these types of claims are too uncertain and, in most cases, the requirements and processes to file differ as well.
Custodians already operate across an extraordinarily broad set of responsibilities, and this is a specialised area where the cost of missing a relevant development can far exceed the cost of engaging a firm.
For that reason, many financial institutions find value in working with specialised providers that maintain deep expertise and monitor these developments continuously. These partnerships obviate the need to build comprehensive internal solutions, helping institutions navigate the evolving landscape more effectively.
Looking at the different withholding tax frameworks between the US, Canada, and major European markets, where do you see the greatest inefficiencies for global investors today?
Hautus: Fragmented frameworks are clearly the major obstacle — differing WHT rates, eligibility criteria for bilateral tax treaties and refund procedures, all of which require costly in-house or outsourced tax expertise. The US regime is particularly complex, with multiple eligible entity categories and frequent Internal Revenue Service (IRS) updates that increase the risk of errors. Canada’s reclaims are also cumbersome for non-resident investors, especially around complex intermediary structures or bilateral tax treaties.
Europe remains deeply fragmented in areas such as refund deadlines (France and Germany) and documentation requirements (Nordics).
Across the globe, bilateral tax treaty application remains inefficient and the beneficial ownership concept is still open to interpretation. Slow procedures and complex eligibility criteria with short timeframes lead to investors missing out on treaty benefits to which they are entitled.
However, Europe’s FASTER Directive and discussions around the simplification of the US’s Foreign Account Tax Compliance Act (FATCA) regime indicate the authorities’ growing awareness of these issues.
Webb: The most significant inefficiencies are in Europe, where global investors intersect with highly localised withholding tax rules and processes. Unlike the more centralised systems in the US and Canada, many European markets rely on market-specific documentation and relief mechanisms. This creates operational complexity and inconsistent investor outcomes. The issue is not complexity itself, but the lack of standardisation and automation to manage it effectively. Until these processes are modernised, investors will continue to face unnecessary friction and cost in European markets.
Bricker: A key inefficiency is the repeated requirement to provide the same information in different formats to different authorities, often multiple times, in order to obtain relief. This duplication is operationally heavy and prone to inconsistency.
Despite ongoing digitisation efforts, inefficient paper-based processes still dominate in many jurisdictions. In addition, withholding tax recovery is not a one-off exercise. It requires constant management and continuous prospective claim filing across multiple markets.
Finally, many traditional recovery processes still focus on reclaim filing close to statute rather than as soon as practically possible. Accelerating filings is critical, as earlier recovery enables reinvestment sooner and reduces the opportunity cost associated with delayed refunds.
Taken together, these pressures illustrate a broader structural issue. Today’s inefficiencies are driven by regulatory complexity compounded by fragmented, manual processes that have not kept pace with market and compliance demands.
Ashkboos: The US qualified intermediary (QI) regime has created an operationally safe withholding tax environment with practicality. Its expansion to include IRC Section 871M and qualified derivatives dealer (QDD) regime in 2017 has proven beneficial for non-US investors and financial institutions, providing a harmonised process with Guidance.
Within Europe, frustration remains due to the lack of consistency across EU countries on tax entitlement rules. Notwithstanding the EU Commission Directive, FASTER (1 January 2030), to harmonise and strengthen withholding tax processes across EU Member States, dispersed tax procedures may still continue to exist in conjunction with the absence of an EU definition of beneficial ownership. Accumulated fiscal dysfunction suggests global investors will continue to face uncertainty on end-yield tax investments across Europe.
Friedman: Across the US, Canada, and Europe, the greatest inefficiency is the disconnect between treaty entitlement and operational execution. In the US, relief is highly documentation-driven; in Canada, reclaim timelines and administrative requirements create friction; and across Europe, investors still face a patchwork of market-specific forms, evidentiary standards and processing practices. For global investors, that fragmentation translates into delayed recoveries, repeated exceptions and unnecessary cash drag.
At Global Tax Recovery, we see the solution as moving clients upstream wherever possible, using stronger entitlement data, automated document controls and market-specific expertise to maximise relief at source, while making unavoidable reclaims faster, more transparent and easier to manage. The result is not just better processing, but a lower operational burden, improved visibility and more predictable recovery outcomes for clients.
Lipton: As noted above, the most persistent inefficiency centres on the custody chain — specifically, the burden on intermediaries to produce and verify documentation to the satisfaction of tax authorities.
Another key issue is the varying levels of technological infrastructure and investment at the tax authorities. Markets that have implemented electronic filing systems and internal technology to process digital claims are generally able to review applications and issue refunds much more quickly. In contrast, jurisdictions with limited technological infrastructure often face significantly longer processing times. Those delays, in turn, create additional administrative burdens as investors and service providers attempt to track the status of submitted claims.
Layer on top of that procedural requirements that shift continuously in ways that diverge from what has been formally published, and you have a framework with perpetually growing structural barriers between investors and the entitlements they are legitimately owed.
Julia Bricker: We embed AI into our proprietary rules engine to ensure that we always select the most preferential rate of recovery available to a client, while also prioritising the shortest possible refund timelines. This incorporates treaty rates, domestic exemptions, case law, claimant structure and filing mechanics to determine the optimal recovery path.
Beyond rate selection, we use AI extensively across document completion, document validation and reconciliation as well as automated error and exception handling. This drastically improves processing speed and materially reduces the risks associated with manual intervention, particularly in high volume environments.
We also use AI to source and analyse publicly available information and documentation, validating client responses against authoritative public sources to enhance our risk and control framework and identify anomalies early in the process. In addition, AI supports transaction-level screening, helping us identify suspicious transactions and exclude transactions that are not eligible for relief. Together, these applications strengthen both recovery outcomes and compliance integrity.
Sarah Webb: Our use of automation is deliberately practical. The challenge in withholding tax (WHT) is not so much a lack of intelligence, but inconsistencies in how treaty rules are applied across markets. We focus on automation that applies entitlement logic in a repeatable way at scale, reducing reliance on error-prone manual intervention. AI tools are used to identify data inconsistencies or documentation gaps that would otherwise lead to incorrect withholding. The objective is not to introduce AI decision-making, but to reduce operational risk and improve investment outcomes. This approach allows clients to manage complex cross-border portfolios more effectively while minimising what they leave on the table.
Roann Hautus: CACEIS leverages robotic process automation (RPA) and AI to offer a more robust and faster tax reclaim process as timing and accuracy are key — statutes of limitation being the main cause of irreversible tax losses. AI-driven deadline monitoring and automated workflows ensure claims are identified, prepared, and filed ahead of cut-offs, significantly reducing expiration risk. Ultimately, our use of AI is about protecting investor value, minimising tax drag, and delivering more efficient, technology-enabled custody services.
We are currently trialling AI-powered real-time monitoring of international tax rate and regulation changes to enable us to react faster and push out rapid alerts to clients. We are also testing AI tech in automated withholding tax calculation to identify client residency, asset type, issuing jurisdiction and any relevant bilateral tax treaties. Such tech will lighten the administrative burden and provide insightful proposals to assist investment or tax advisors. However, it will assist our tax experts rather than replace them — an assistant, completing forms and streamlining refund processing by facilitating reconciliations.
Mark Friedman: At Global Tax Recovery, we use automation and AI to simplify one of the most fragmented challenges in cross-border investing: achieving the correct withholding tax outcome across multiple treaty jurisdictions. Servicing clients with over US$5 trillion in assets under management across 20+ jurisdictions, we have built the operational depth to handle this complexity at scale. Through DiviBack, we digitise and securely reuse client documentation, connect dividend events to treaty entitlements, and automate validations, reconciliations and exception handling in real time.
AI strengthens that process by extracting and cross-checking data, monitoring regulatory developments and identifying cases that require immediate attention, while our specialists retain oversight of complex market-specific issues. For clients, that means less administrative burden, lower tax leakage, greater transparency and a scalable, audit-ready service that is already aligned with the market’s move toward digital relief frameworks such as OECD TRACE and the EU’s FASTER initiative.
Len Lipton: Automation is absolutely central to our operating model. We file more than 20 million claims annually, a scale that would just not be possible without highly automated infrastructure.
As one example, we recently launched a product called ESP+, which digitises tax rates and documentation requirements and links them to specific income events through the Corporate Action ID. This functionality allows clients to automatically determine beneficial owner eligibility for each American depository receipt (ADR) income event. Clients can also submit ADR claims directly through system-to-system communication — either API-driven or via secure file transfer protocol (SFTP) — rather than manually uploading claims through a portal.
With respect to artificial intelligence, we are taking a deliberate and methodical approach. At present, we are mainly using AI to augment internal functions such as research, software development, data analytics, and DevOps. While we are excited about emerging AI use cases, we are also cautious in their deployment, particularly given our commitment to maintaining the highest standards of client data security and confidentiality.
What specific technological innovations have you implemented to address the challenges posed by the EU’s FASTER Directive, and what operational efficiencies are clients seeing?
Webb: FASTER is fundamentally an infrastructure challenge. Our technology supports standardised data exchange, automated entitlement assessment and clear audit across markets, which are central to what the Directive seeks to achieve. We have prioritised scalable processes that can adapt to local market implementation. TaxTec clients experience lower rates of manual processing, fewer reconciliation breaks and improved certainty around relief and reclaim outcomes. The benefit is not simply speed, but lower cost and increased control: firms can evidence compliance and decision-making in a way that satisfies both regulatory expectations and fiduciary responsibilities.
Bricker: The FASTER Directive will come into effect in January 2030, and EU Member States have until the end of December 2028 to transpose it into national legislation. This means there is still meaningful structural uncertainty around how individual jurisdictions will implement the Directive in practice.
Against that backdrop, we are proactively building infrastructure to support custodial clients in meeting their anticipated obligations. This includes automated reporting frameworks and the use of sophisticated AI to assist with validations relating to beneficial ownership entitlement, eligibility for reduced rates of tax, and identifying transactions where there may be a risk of an unacceptable financial arrangement. We are also leveraging automated document validation processes that already exist across our business to ensure scalability once new requirements are finalised.
Separately, there remains uncertainty around how liability will operate for Certified Financial Intermediaries (CFIs) and how final reporting frameworks will be structured. While the Directive aims to introduce a more efficient and unified relief process, including electronic certificates of tax residence, these open questions require institutions to build systems that are flexible and defensible. Our focus is therefore not only on automation, but on ensuring that our controls framework is robust enough to operate under evolving interpretations and potential liability shifts.
Hautus: FASTER aims to combat the lack of tax authority harmonisation in communications and data transmission with digital tax residence certificates (CRFN) and registers of CFIs, streamlining stakeholder identification for taxation and WHT repayments.
Its digital reports will streamline data transmission, raising auditability of the payment chain, simplifying end-investor identity and permitting automated matching of WHT recovery requests with relevant financial flows. Short-term benefits for clients include significantly shorter repayment times, reduced operational risk and higher service quality.
We are developing automated workflows to streamline data collection and validation, minimising client involvement. Our innovative semi-autonomous e-TRC management pre-fills required forms with client data, leaving only validation to be performed. Additional enhancements include automated eligibility checks, real-time dashboards, standardised data layers and embedded compliance controls. Clients benefit from reduced administrative burdens, faster processing of relief-at-source or refund claims, reduced error rates and full audit traceability. By industrialising FASTER-related processes, investment fund compliance is efficient and secure, allowing our asset managers to focus on portfolio management and generating investor value.
Friedman: Global Tax Recovery has invested in a FASTER-ready digital withholding tax platform that turns regulatory changes into a simpler, faster and more controlled client experience. We automate data capture and standardisation across custodians, use AI-enabled controls to validate tax residence, treaty entitlement and supporting documentation, and connect client records to digital eTRC, certified intermediary reporting and electronic filing workflows. For clients, that creates a cleaner path to relief at source and quick refunds, with fewer manual touchpoints, fewer exceptions and full audit-ready transparency across the reclaim lifecycle.
Our monitoring tools give operations teams real-time visibility over every key deadline, helping them stay ahead of reporting and repayment milestones. The result is faster onboarding, higher straight-through processing and lower operational risk.
Lipton: FASTER is poised to introduce a substantial expansion of reporting obligations, and financial intermediaries will bear significant responsibility for facilitating those data flows.
The required infrastructure is quite similar to what we already support through our ESP platform — managing requirements, validating data, and transmitting documentation through the custody chain to provide tax authorities with full transparency to the ultimate beneficial owner.
We will be prepared to deploy FASTER solutions as soon as they are codified. At this stage, however, the Directive’s technical specifications continue to evolve and are not yet fully codified by the EU and individual jurisdictions. To be sure, we’ve been active contributors to the industry working groups responsible for developing both the general administrative framework and technical standards like file format specifications. Given the insights we have gleaned from participation, we feel we are well-positioned to respond as the regulatory framework reaches maturity.
With digital tax reporting requirements intensifying globally, how do platforms handle real-time withholding tax calculations and documentation for cross-border portfolios?
Bricker: We operate a completely bespoke rules engine built in-house, which uses complex algorithms that combine the legal structure of the claimant, available relief and recovery opportunities, statutory timelines for both relief at source and reclaim, and the unique documentation requirements of each jurisdiction.
Because changes in withholding tax legislation and administrative practice are constant, the system is continuously monitored and updated by our expert tax technical team. This oversight is supported by subscriptions to specialist publications, direct relationships with tax authorities who proactively share updates and AI-driven monitoring tools that assist in identifying changes and anomalies.
The combination of structured technical expertise and automation allows us to manage real-time withholding tax calculations and documentation requirements at scale, while maintaining accuracy, auditability and compliance across cross-border portfolios.
Webb: Real-time calculation is only valuable if it is supported by robust entitlement logic and reliable data. Our approach prioritises an accurate assessment of withholding tax treatment, aligned with validated documentation and transparent workflows. To our way of thinking, platforms must ensure that tax calculations are directly linked to investor data, rather than treated as a standalone function. As reporting obligations increase, the ability to evidence how a tax outcome was reached becomes critical. At TaxTec, our focus is on building resilient, automated and auditable processes that operate consistently across jurisdictions.
Hautus: The most advanced platforms are built on technology capable of quickly determining the applicable withholding tax rate for each transaction, based on the issuer’s jurisdiction, the investor’s tax status, and applicable bilateral tax treaties. They combine several continuously verified data points: tax treaties, Know Your Customer (KYC) and tax residency information for investors, as well as reports on interest, dividends, and securities events.
Beyond proper data management, it is also essential to provide our clients with a clear overview of the status of the procedures we undertake on their behalf. The tax platform we are developing, which will be available to all our clients in a few weeks, will provide this transparency, automatically manage documentation, and facilitate ongoing communication between our tax specialists and our clients.
Friedman: At Global Tax Recovery, real-time withholding tax management means combining advanced technology with disciplined operational oversight to calculate and support the correct rate at the point of payment, rather than recover it months later through costly remediation. Our platform continuously ingests custody, corporate action, and beneficial owner data across cross-border portfolios, reconciles it into a single validated record, and applies treaty and domestic tax rules through version-controlled logic and automated documentation workflows.
We also digitise the collection, validation and secure delivery of the supporting evidence required for relief at source, quick refund and evolving digital reporting obligations. For clients, that translates into lower tax leakage, faster processing, full audit visibility, and the confidence that specialist tax professionals are managing exceptions before they become delays, rejections, or lost value. And because we operate on a no-recovery, no-fee basis, clients can pursue every legitimate entitlement without taking on cost risk.
Lipton: Over three decades of experience in this space have reinforced that rapid and unexpected change is the norm rather than the exception. Our systems and teams are built to adapt quickly to evolving market conditions.
Our proprietary rates and rules engines are continuously updated through a combination of internal research, engagement with industry and regulatory networks, and operational feedback generated from the high volumes we process.
This ‘change native’ mindset is what allows us to process over 20 million claim applications each year. We are designed for flexibility and scale.
Given the persistent issue of over-withheld taxes on cross-border investments, what do you see as the main obstacles preventing more investors from successfully reclaiming their entitlements?
Caroline Ashkboos: There are several entry barriers for investors seeking withholding tax relief on global investments. Intermediaries within the reclaim chain establish at the outset a minimum reclaim amount. Considering intermediary banks may have sizeable investor volumes but modest investment portfolios, investors are immediately penalised.
Fragmented procedures, coupled with varying tax documentation requirements constantly evolving, frustrate investors; notwithstanding our technologically advanced era, the administrative burden of tax reclaims is real leading to investors renouncing tax reclaim entitlements.
Transparent entities are often requested by certain jurisdictions to provide ultimate beneficial owner (UBO) information. Gathering the information is a heavily administrative aspect of the process however considerations must also turn to independent jurisdictional data protection laws, especially outside of Europe, as this may impact the likelihood of UBO disclosure ultimately impacting the success of an entitled reclaim.
Webb: Over-withholding persists because the reclaim process remains fragmented, manual and operationally fragile. Inconsistent documentation standards, varying market practices and long settlement timelines discourage investors from pursuing their legitimate entitlements. The issue is not investor awareness, but a lack of scalable infrastructure to manage reclaims efficiently. Without standardisation and automation, the cost and uncertainty of tax reclamation could often outweigh the benefits. As a result, over-withholding continues to be treated as an accepted friction rather than a solvable operational problem. One of the key reasons I founded TaxTec is to reduce that friction wherever possible, providing institutional investors and their service providers with a high quality operations and service model which solves the problem.
Hautus: Most countries have proprietary reimbursement procedures, forms, deadlines, and documentation requirements — and expertise in this complex area is rare and expensive.
Authorities also require strict proof of tax residency, beneficial ownership of securities, and eligibility for bilateral tax treaties. Gathering and certifying this information with multiple custodians and counterparties is an underestimated administrative burden and also costly so it is often only viable to reclaim substantial amounts. Furthermore, many investors are simply unaware that they are entitled to a reimbursement or underestimate the amounts involved, which is where a service provider can add value.
In some jurisdictions, reclaim procedures can extend over several years, generating a significant opportunity cost, which is compounded when paying procedure costs upfront. By standardising and digitising, FASTER aims to reduce such barriers, however its success depends on coordination between Member States, financial intermediaries, and issuers.
Bricker: The environment is becoming more complex, not simpler. Tax authorities such as those in Norway and Germany are placing increased focus on transactions around dividend ex-dates, which directly affects eligibility for relief. Investors are increasingly required to provide granular trade data and demonstrate the economic substance of their holdings, information that is not always straightforward to obtain retrospectively.
At the same time, the concept of beneficial ownership remains inconsistently defined across jurisdictions and has similarly not been clearly addressed by the FASTER Directive. This lack of clarity increases interpretive risk.
Overlaying this is a broader increase in the burden of proof placed on investors, while tax authority resources remain constrained. The result is more queries, longer claim processing timelines and greater operational friction. Successfully reclaiming entitlements now requires both technical depth and strong process management.
Ali Kazimi: The fundamental barrier preventing investors from reclaiming their entitlement is the complexity of the reclaim infrastructure. Each jurisdiction applies different forms, documentation standards and evidentiary thresholds, which makes cross-border portfolios administratively demanding to manage. Following the Cum-Ex investigations, tax authorities have also become far more cautious when reviewing refund claims, applying stricter scrutiny to investor entitlement and treaty eligibility, often alongside broader anti-abuse considerations.
Processing timelines can extend for years as custodians respond to increasing query volumes and differing treaty interpretations. For smaller investors, the administrative burden can outweigh the expected recovery. At WTS Hansuke, we emphasise that successful reclaim programmes now depend on strong documentation prepared well before a claim is filed, clear custody chain transparency, and the operational capacity to respond efficiently to authority queries.
Friedman: The obstacles are both structural and behavioural. Structurally, every jurisdiction has its own filing requirements, documentation standards, language requirements and processing timelines, creating a maze that most investors simply do not have the in-house expertise to navigate. Behaviourally, many investors still view withholding tax recovery as a low-priority administrative task rather than a meaningful source of portfolio value, despite the fact that effective reclamation can enhance dividend yield by as much as 60 per cent for first-time claimants.
There is also a concern that the cost of recovery outweighs the benefit. At Global Tax Recovery, we have addressed that directly through our no-recovery, no-fee model: if we cannot recover, the client pays nothing. Combined with our proprietary DiviBack platform, our network of specialists across 40+ jurisdictions, and recovery speeds that are significantly faster than the industry norm, we remove the operational, financial, and knowledge barriers that have historically kept investors from pursuing what is rightfully theirs.
Lipton: The most significant obstacle is the complexity of the custody chain and the challenge of sourcing accurate, complete information across each link. Each jurisdiction imposes its own documentation and data requirements, and there is little consistency from market to market. In a number of cases, sub-custodians operating within the same market maintain different documentation requirements.
For standard refund claims, particular challenges include verifying eligible positions, which can take months rather than weeks, and the lack of two-way communication with the tax authorities regarding claim status. Tax authorities are also requiring more information and validations for standard refunds, slowing the process further.
Beyond these logistical challenges, there is a very real risk of liability. Many intermediaries are simply unwilling to take on the risk these processes carry, which further constrains investors from securing the data and validation needed to access to their entitlements.
How are recent regulatory developments in Europe affecting North American investors’ approach to European equity holdings?
Ashkboos: 2027 will see Europe’s first tax regulatory reporting become effective under Germany’s MiKaDiv Legislation. Mandatory transaction reporting at investor level will be required as a pre-validation tool for the German Tax Administration to validate investors’ eligibility to submit withholding tax reclaims. Investors will be fully dependent on its chain of financial institutions to comply with the reporting requirements; failure to do so may result in entitled reclaim opportunities foregone.
Notwithstanding increased compliance costs for financial intermediaries (systemic infrastructures, continuous monitoring capabilities), as the regulatory landscape evolves investors may also bear the cost of recalibrating portfolios due to market complexities which do not meet the risk-versus-reward principle.
Kazimi: North American investors increasingly embed tax recoverability directly into European equity portfolio construction. Increased scrutiny of dividend-related trading activity, combined with upcoming reforms such as Germany’s MiKaDiv regime and the EU’s FASTER Directive, will significantly increase transparency across custody chains, including omnibus structures common in global custody.
In response, institutions are prioritising treaty-resilient holding structures, strengthening beneficial ownership documentation and centralising reclaim management earlier in the investment process. We see investors treating Europe less as a simple yield opportunity and more as a compliance discipline: allocating selectively to markets with predictable reclaim processes while integrating tax recoverability into portfolio design from the outset.
Webb: North American investors are paying closer attention to withholding tax leakage in European markets. Increased regulatory scrutiny and initiatives such as FASTER are highlighting the cost of passive approaches to withholding tax. Investors are increasingly focused on whether their service providers can deliver efficient and effective reclaim outcomes. This is driving a shift toward greater transparency, predictability and governance in tax processing. From our perspective, this reflects a broader move towards optimisation and operational robustness as key drivers of improved investment outcomes.
Bricker: One of the main developments investors are grappling with is the request for additional information regarding share trading around dividend ex-dates. Many European countries are requesting this data, but with differing holding period requirements and no consistent definition of beneficial ownership, which materially increases complexity.
In practice, this has translated into delayed filings as investors pause to gather additional transaction-level data and reconcile trading activity around dividend ex-dates before submitting claims. The need to provide more granular information has also reduced predictability around claim status, as filings become conditional on supplementary disclosures and subject to extended review cycles.
At the same time, it has become more difficult for investors to accurately assess withholding tax leakage. When eligibility depends on nuanced holding period analysis and evolving interpretations of beneficial ownership, the true recoverable amount is harder to quantify upfront. This has all resulted in a marked increase in documentation requirements and tax authority queries, which lengthen processing timelines and introduce greater operational uncertainty into the reclaim cycle.
For North American investors, this means that European equity exposure now carries a materially higher compliance and oversight burden, requiring more active management of the reclaim process.
Hautus: We are seeing North American investors adapt their operational infrastructure to meet FASTER, MiFID II, and ESG reporting and transparency obligations, which incurs significant compliance costs, possibly discouraging investment in Europe. However, it also presents an opportunity to differentiate your investment prowess by leveraging analytical capabilities and resources that only large players can afford. FASTER is welcomed as it seeks to simplify and accelerate WHT reclaim on European dividends. And for large North American funds, WHT reclaims can be considerable, increasing the attractiveness of investment in Europe.
Friedman: Recent regulatory developments are making North American investors treat European equity exposure as an operational discipline, not simply an allocation decision. FASTER is accelerating the shift toward standardised digital tax-residence evidence and faster withholding-tax relief, while Europe’s move to T+1 is forcing investors to tighten trade matching, beneficial owner validation, cash, and FX funding, and exception management much earlier in the process.
In practice, investors are demanding more automation, stronger audit trails, and service partners who can protect dividend entitlements without creating friction in the custody chain. At Global Tax Recovery, we see the most prepared clients digitising entitlement data upfront and using API-connected workflows to deliver faster recovery, better transparency, and greater control across post-trade and tax operations. As an authorised IRS Certifying Acceptance Agent, we also simplify the US documentation process for non-resident investors, removing one of the most common friction points in cross-border tax recovery.
Lipton: From our vantage, FASTER does not yet appear to be materially influencing how North American investors are sizing or structuring their European equity exposure. Although we are tax processing experts rather than investment professionals, the shifts toward Europe we have observed seem more attributable to macroeconomic factors like exchange rates and other market dynamics that have made European equities more attractive of late.
At the moment, we are not seeing evidence that regulatory developments are influencing holding period decisions or anything like that, though that calculus may shift as FASTER implementation progresses
With several European jurisdictions facing legal challenges over dividend tax practices, how should custodians and asset servicers be adjusting their fiduciary obligations and operational processes?
Bricker: There is a clear need to bring AI into the core of operational processes and to integrate systems used for tax, anti-money laundering (AML) and KYC. When these datasets are connected, AI can reuse verified investor identity and risk signals across workflows to automate entitlement checks, strengthen control frameworks and reduce duplicative reviews and false positives.
The risk and burden on financial intermediaries are increasing, particularly around due diligence of investor entitlement. Fragmented systems amplify this risk by creating data silos and inconsistencies across functions, which expose institutions to regulatory and reputational risk.
Custodians and asset servicers should therefore focus on integrated data environments and automated validation controls that connect investor onboarding information directly with tax entitlement assessments. A unified, technology-enabled approach reduces operational friction while materially lowering fiduciary exposure.
Kazimi: Custodians and asset servicers are facing an expansion of their fiduciary responsibilities as dividend tax litigation and new transparency frameworks shift greater accountability toward financial intermediaries. Germany’s MiKaDiv regime from 2027 and the EU’s FASTER Directive that is due to apply later this decade, introduce onerous reporting obligations for certified intermediaries, and significantly increase visibility across custody chains.
For custodians and asset servicers, this means fiduciary duty now extends beyond the mechanical processing of withholding tax claims. While investor representations and tax certifications remain important, intermediaries can no longer rely on them without scrutiny. Similar to AML/KYC frameworks, custodians are increasingly expected to apply a ‘reason to know’ standard: verifying that ownership information, transaction reporting, and eligibility data are consistent across the custody chain and investigating where red flags arise.
In practice, fiduciary obligations increasingly require stronger governance, verification controls and audit-ready documentation around tax reporting processes. Institutions that can demonstrate reliable oversight and clear evidentiary standards will be better positioned as regulatory scrutiny of dividend withholding tax practices continues to intensify.
Hautus: Recent legal disputes in several European jurisdictions place custodians and asset service providers in a position of increased responsibility. Custodians must now adopt a more vigilant and informative approach toward their clients, who demand more and better information. Enhanced legal monitoring and a review of past events should enable them to clearly map the jurisdictions exposed to legal challenges. This, combined with a precise analysis of client portfolios, allows for better targeting of local problem alerts.
Webb: Legal challenges have underscored that withholding tax processing is not purely administrative. Custodians and asset servicers need to demonstrate that tax outcomes are the result of controlled, well-governed processes. This requires the elimination of manual processes and investment in modern automated systems. Fiduciary responsibility increasingly extends to how tax risk is managed operationally. Custodians and asset servicers that invest in robust, transparent processes will be better positioned to respond to regulatory scrutiny and evolving client expectations.
Friedman: With several European jurisdictions facing legal scrutiny over dividend tax practices, custodians, and asset servicers need to elevate withholding tax from an administrative function to a core fiduciary obligation. That means applying stronger eligibility controls before payment, validating beneficial ownership with precision, and maintaining a fully auditable record for every tax rate applied and every reclaim submitted.
The real differentiator, however, is technology: firms should be using rules-based engines, automated exception workflows and digital client portals to reduce risk, accelerate recovery and give investors complete transparency over status and exposure. In this environment, clients are not looking for manual processing; they are looking for a partner that can combine transparency, governance, automation and service excellence to protect returns and deliver confidence at scale. That is precisely the model we have built at Global Tax Recovery, and the results speak for themselves: faster recoveries, complete audit trails, and a client base that includes some of the world’s largest financial institutions.
Lipton: This relates to European Court of Justice cases and the decisions and appeals that are slowly but persistently winding through courts.
Our view is that until the underlying laws are changed in these jurisdictions, it is difficult for custodians and asset servicers to update their fiduciary obligations or operational processes. The legal framework justifying these types of claims are too uncertain and, in most cases, the requirements and processes to file differ as well.
Custodians already operate across an extraordinarily broad set of responsibilities, and this is a specialised area where the cost of missing a relevant development can far exceed the cost of engaging a firm.
For that reason, many financial institutions find value in working with specialised providers that maintain deep expertise and monitor these developments continuously. These partnerships obviate the need to build comprehensive internal solutions, helping institutions navigate the evolving landscape more effectively.
Looking at the different withholding tax frameworks between the US, Canada, and major European markets, where do you see the greatest inefficiencies for global investors today?
Hautus: Fragmented frameworks are clearly the major obstacle — differing WHT rates, eligibility criteria for bilateral tax treaties and refund procedures, all of which require costly in-house or outsourced tax expertise. The US regime is particularly complex, with multiple eligible entity categories and frequent Internal Revenue Service (IRS) updates that increase the risk of errors. Canada’s reclaims are also cumbersome for non-resident investors, especially around complex intermediary structures or bilateral tax treaties.
Europe remains deeply fragmented in areas such as refund deadlines (France and Germany) and documentation requirements (Nordics).
Across the globe, bilateral tax treaty application remains inefficient and the beneficial ownership concept is still open to interpretation. Slow procedures and complex eligibility criteria with short timeframes lead to investors missing out on treaty benefits to which they are entitled.
However, Europe’s FASTER Directive and discussions around the simplification of the US’s Foreign Account Tax Compliance Act (FATCA) regime indicate the authorities’ growing awareness of these issues.
Webb: The most significant inefficiencies are in Europe, where global investors intersect with highly localised withholding tax rules and processes. Unlike the more centralised systems in the US and Canada, many European markets rely on market-specific documentation and relief mechanisms. This creates operational complexity and inconsistent investor outcomes. The issue is not complexity itself, but the lack of standardisation and automation to manage it effectively. Until these processes are modernised, investors will continue to face unnecessary friction and cost in European markets.
Bricker: A key inefficiency is the repeated requirement to provide the same information in different formats to different authorities, often multiple times, in order to obtain relief. This duplication is operationally heavy and prone to inconsistency.
Despite ongoing digitisation efforts, inefficient paper-based processes still dominate in many jurisdictions. In addition, withholding tax recovery is not a one-off exercise. It requires constant management and continuous prospective claim filing across multiple markets.
Finally, many traditional recovery processes still focus on reclaim filing close to statute rather than as soon as practically possible. Accelerating filings is critical, as earlier recovery enables reinvestment sooner and reduces the opportunity cost associated with delayed refunds.
Taken together, these pressures illustrate a broader structural issue. Today’s inefficiencies are driven by regulatory complexity compounded by fragmented, manual processes that have not kept pace with market and compliance demands.
Ashkboos: The US qualified intermediary (QI) regime has created an operationally safe withholding tax environment with practicality. Its expansion to include IRC Section 871M and qualified derivatives dealer (QDD) regime in 2017 has proven beneficial for non-US investors and financial institutions, providing a harmonised process with Guidance.
Within Europe, frustration remains due to the lack of consistency across EU countries on tax entitlement rules. Notwithstanding the EU Commission Directive, FASTER (1 January 2030), to harmonise and strengthen withholding tax processes across EU Member States, dispersed tax procedures may still continue to exist in conjunction with the absence of an EU definition of beneficial ownership. Accumulated fiscal dysfunction suggests global investors will continue to face uncertainty on end-yield tax investments across Europe.
Friedman: Across the US, Canada, and Europe, the greatest inefficiency is the disconnect between treaty entitlement and operational execution. In the US, relief is highly documentation-driven; in Canada, reclaim timelines and administrative requirements create friction; and across Europe, investors still face a patchwork of market-specific forms, evidentiary standards and processing practices. For global investors, that fragmentation translates into delayed recoveries, repeated exceptions and unnecessary cash drag.
At Global Tax Recovery, we see the solution as moving clients upstream wherever possible, using stronger entitlement data, automated document controls and market-specific expertise to maximise relief at source, while making unavoidable reclaims faster, more transparent and easier to manage. The result is not just better processing, but a lower operational burden, improved visibility and more predictable recovery outcomes for clients.
Lipton: As noted above, the most persistent inefficiency centres on the custody chain — specifically, the burden on intermediaries to produce and verify documentation to the satisfaction of tax authorities.
Another key issue is the varying levels of technological infrastructure and investment at the tax authorities. Markets that have implemented electronic filing systems and internal technology to process digital claims are generally able to review applications and issue refunds much more quickly. In contrast, jurisdictions with limited technological infrastructure often face significantly longer processing times. Those delays, in turn, create additional administrative burdens as investors and service providers attempt to track the status of submitted claims.
Layer on top of that procedural requirements that shift continuously in ways that diverge from what has been formally published, and you have a framework with perpetually growing structural barriers between investors and the entitlements they are legitimately owed.
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