Published : 6 years ago, on 06/09/2018

US investors’ leave over$3.5 billion on the table

The latest research from Goal Group, a leading global provider of withholding tax reclamation services, shows that $18bn of investors’ rightful returns from foreign shares and bonds were lost in the latest financial year because withholding tax on dividends and income is not being fully reclaimed.

US investors suffered the biggest losses out of all markets globally, missing out on $ 3.5bn in recoverable returns, a marginal decline since 2015 of around 2%. However, this marginal decline should be viewed against the fact that the value of US shareholders’ holdings in foreign equities, for instance, has risen in value by over 50% across the same period[i].

Goal estimates that average tax reclamation rates have improved by 9% since the company’s last report on the global tax reclamation landscape in 2013. Currently just under 21% of excess tax remains unclaimed each year.

Victoria Dean, Director of Sales & Relationship Management EMEA & Global Director of Withholding Tax Sales at Goal Group, said: “Just over one fifth of recoverable withholding tax still languishes in foreign tax systems each year, which amounted to a loss of $3.5bn million to US cross-border investors in 2017. Funds that reclaim tax typically boost returns by at least 25 basis points annually, yet there is still the belief that the complex reclamation process isn’t worth the trouble. With the right technology and services, this is simply not true.

“It is therefore an inexcusable loss of rightful returns on which shareholders are often unwittingly losing out. Custodians and fund managers have a fiduciary duty to maximise returns for shareholders, and withholding tax reclamation is a vital element of this.  The gains become even more significant in view of rising proportions of portfolios devoted to cross-border investments and continued rises in global dividend pay-outs[ii].”

Goal has recovered hundreds of millions of dollars in withholding tax for its global client base, which includes five of the top ten global custodians and six of the top ten global fund managers.

[i] Source: IMF

[ii] Source: e.g. Morningstar, Investors Set For $1.25 Trillion Dividend Windfall, 20 Nov 2017