GlobeTax, the provider of outsourced withholding tax services to a number of custodian banks, last month launched a SWIFT Service Bureau to automate tax reclaims and relief at source applications for custodians, asset managers and broker-dealers.
GlobeTax says the service bureau will allow users to provide a comprehensive withholding tax service to clients at a lower cost in overheads.
“For several years, many custodians and fund managers have embarked on a strategy to leverage efficiencies and cost savings by implementing Straight Through Processing (STP),” says Bob Davies, Regional Director Securities, SWIFT Pan Americas. “SWIFT has been a pivotal force and platform for institutions to achieve this due to our dual role as guardians of industry message standards (e.g. ISO15022) and providers of network infrastructures, including FIN & SWIFTNet. However, many of the functions occurring in back office environments are still manually processed. Until the financial services community finds a way to automate these processes, the full benefits of STP cannot be enjoyed. To the extent that it helps the industry move towards STP in corporate actions, we welcome service bureaux such as GlobeTax on board.
Len Lipton, VP of Marketing for GlobeTax, says the software tools that allow custodians, fund managers and broker-dealers to calculate the value of tax reclaims and print forms are a valuable alternative to spreadsheets, but they leave a manual process largely untouched. “The process is predominantly manual with forms having to be posted back and forth to beneficial owners, local tax authorities, foreign agent banks and ultimately foreign tax authorities,” he says. “Pre-sales modeling shows that using this service bureau could save up to 65% of withholding tax processing costs and make the process effectively STP from the subscriber’s perspective – electronic data files out, receivables posting, electronic reports and reclaim entitlements in, all by SWIFT.”
The new service is available to all 7,650 SWIFT users. GlobeTax says the first customers are expected to be operational by September. The beneficial owner and income data needed for tax processing is sent from the subscriber’s primary BIC to a dedicated additional destination BIC managed securely on the subscriber’s behalf by the Service Bureau. Once received, the Service Bureau will quality check the data, calculate the reclaim, complete the correct forms, append the additional required documents, file and follow up on the reclaims.
Reporting via SWIFT FileAct will keeps the users up to date with compliance and fiduciary duties, while their clients will receive tax reclaim funds automatically in their accounts. “GlobeTax’s processing volumes, over a million reclaims a year, will also benefit Service Bureau users,” says Martin S. Foont, President & CEO of GlobeTax. “Our expertise and relationships with all tax authorities often allows us to get client money back faster than market standards. In addition, some investors are entitled to apply to foreign governments to be taxed correctly at source (relief at source). This application process can be as arduous as processing remedial tax reclaims but the Service Bureau will process these local applications free of charge.”