Cross-border portfolio investments are greater than $35
trillion globally, but the intended tax benefits are so difficult to claim that
they often do not reach their intended targets. In response, the
Organisation for Economic Cooperation and Development (OECD) has developed and approved a
standardized system of relief meant to streamline processes, reduce costs and
assure investors their rights, while also improving tax compliance.
The electronic system allows tax authorities to exchange
information and financial institutions to report information to tax
authorities. The new “Treaty Relief and Compliance Enhancement” system is based
on eXtensible Markup Language (XML) technology. The United States and Canada are
among the
34 countries in North and South America, Europe, Asia, Australia and New
Zealand that participate in the OECD.
The135-page “
Trace
Implementation Package” adopted on January 23, 2013 by the OECD committee
that developed it would allow authorized intermediaries to claim exemptions or
reduced rates of withholding taxes on a pooled basis on behalf of their
portfolio investor customers.
The package
contains a complete set of tools and documents for intermediaries to begin
using the system, although OECD acknowledges there are still some technology
issues to resolve and, in some cases, participating countries may need to change
certain domestic laws to enable intermediaries to participate. Learn more about
this system at the
OECD website and read the article “
OECD
Offers Plan for Cross-Border Investment Tax Woes” at
Compliance Week online
