Claiming back what are called withholding taxes is becoming an increasingly pressing matter. The European Union, for example, enacted a directive just over a year ago to make procedures more efficient and secure. Not reclaiming what is due is also a fiduciary lapse for wealth managers.

The world’s wealth management sector is constantly hunting for new ways to deliver market-beating returns. But there is a constant frictional cost to consider: tax. And one way to improve results is reclaiming withholding taxes. In the past, this has been hard to do.
 
With technology marching ahead, however, recovering withholding taxes is becoming easier. The amounts available to be claimed back are large. According to research undertaken by TaxTec, a UK business, about $16.4 billion of withholding tax is left unclaimed each year, representing roughly 20 per cent of reclaimable amounts. That implies a total annual opportunity of more than $80 billion globally. According to the European Commission, the estimated cost of unclaimed withholding tax recoveries is €8.4 billion ($9.80 billion) per annum in the EU alone (source: Finastra, July 2022).

As a rule, UK domestic law requires companies making payments of UK-sourced interest to withhold tax at 20 per cent (proposed to rise to 22 per cent from 6 April 2027), regardless of where they are resident. There are some exceptions, such as interest on private placement debts of UK companies.

As wealth managers have a fiduciary obligation to achieve the best possible outcomes for their clients, not doing everything possible to reclaim such taxes won’t wash, argues Stephen Everard, CEO of TaxTec Group. 

“The importance lies in the scale of value leakage. Withholding tax is money investors are legally entitled to reclaim under double-taxation treaties, yet a significant portion goes uncollected,” Everard told WealthBriefing in an interview. “This is not operational ‘noise’ – it is a direct and recurring drag on portfolio returns, making it highly relevant to asset managers, wealth managers, family offices, their agents and service providers.”

“There is growing recognition that withholding tax recovery is not just a back-office issue but a fiduciary and performance issue,” Everard said. 

As global financial markets are buffeted by geopolitics and worries about inflation or earnings, squeezing more value from portfolios by reducing the tax hit seems a wise course.

The importance of this matter has created a number of business models. There are some other tech-driven firms operating in the withholding tax reclamation space. For example, Sprintax Returns is an online federal e-filing and state tax return self-preparation software for US non-residents. Another example is RAQUEST, based in Germany and Switzerland, which describes itself as a "comprehensive product suite for financial institutions to handle withholding tax."

Finastra, the tech firm, has combined its Fusion Invest solution with WTax’s expert services to alleviate time consuming and complex processes to reclaim tax across multiple jurisdictions.

Billions in play
The European Commission has flagged the issue as a major problem. Citing IMF figures, it said securities held by non-domestic investors in the EU in 2019 were worth $10.7 trillion. To avoid double taxation, many countries agreed to share taxing rights between the source and the residence countries by signing double tax treaties. These treaties may entitle non-resident investors to a lower rate of withholding taxes or to an exemption in the country in which they are levied. 

But there is a hitch: “The problem is that these refund procedures are often lengthy, costly and cumbersome, causing frustration for investors and discouraging cross-border investment within and into the EU,” the Commission said. “Withholding tax procedures applied in each Member State are currently very different. Investors have to deal with more than 450 different forms across the EU, most of which are only available in national languages.”

In November 2025, the UK Shareholders’ Association described the unclaimed withholding tax issue as a “scandal,” saying that the the brokerage and wider financial industry must step up and help. “Every dividend received from a foreign country is potentially taxed before it reaches you – ‘withholding tax’. You can do something about that. But only if your broker helps you,” it wrote.

TaxTec’s Everard clearly sees these difficulties as an opportunity to provide its technology to the financial industry, much as a host of tech firms have rolled out solutions to help wealth managers to handle the chores of KYC checks, onboarding and client reporting, for example. Privately owned, London-based TaxTec is designed to enable institutional investors to identify, process and maximise the recovery of withholding tax globally. And like so many others, it is harnessing AI to function.

“Our platform digitises and automates the full lifecycle – from data ingestion and eligibility validation through to submission, tracking and recovery – transforming what has historically been a manual and fragmented process into a scalable, automated and fully-auditable solution developed specifically for institutional-grade operations,” Everard said. 

“Historically, legacy processes have been manual, fragmented and highly complex, creating structural barriers to recovery,” he said. 

The challenges have been vast. For example, there are more than 3,000 tax treaties covering more than 100 jurisdictions; there is a wide variety of entity types, filing requirement and documentation standards. Much of the data has been manually processed, with little visible information about the status of claims – whether they succeeded or failed. The high costs of claiming such taxes have tended to weaken the desire to do so.

“Our focus is on reframing tax reclamation as a strategic capability rather than an administrative burden. We are actively demonstrating to prospects and clients what they are eligible to reclaim by running their portfolio holdings through our proprietary calculation engine,” Everard said. 

Regulatory moves may light a fire under the tax reclamation trend, Everard said. For example, initiatives such as the EU’s FASTER directive is helping to speed matters up and shine a light on certain practices. The full name of the directive is the “Faster and Safer Tax Relief of Excess Withholding Taxes (FASTER) Directive,” agreed on by the European Council in 2024. The new rules make withholding tax procedures in the EU more efficient and secure for investors, financial intermediaries and national tax administrations.

All this activity puts a premium on the need to track a sea of data and crunch the numbers. For Everard, he hopes that his firm, established in 2023, can tap further into the reclamation trend.