Leaving Alpha with the Taxman

Funds and investors who invest outside of their home country may be leaving money from withheld taxes on the table. Moreover, a recent decision from the Court of Justice of the European Union may have increased the amounts at stake. On the facts presented, the court determined that a member state of the European Union must accord the same tax treatment to residents and non-residents (but only if certain conditions are met). The case involved a U.S. fund that sought to retrieve a 15% tax on dividends paid by Polish companies in which it was invested. Exactly how all this will play out is unclear; even the specific plaintiffs that brought the case may not receive their refund until (i) a Polish court determines that the relationship between the U.S. and Poland permits verification of certain information and (ii) non-discriminatory legislation is adopted. While the decision is detailed, the message is simple: investors may benefit from efforts to reclaim tax withholdings—even those which have previously been declined.

Recognizing that the reclamation process can be complicated, RFG offers more information on tax withholding, including a chart with samplings of taxation rates available to U.S. investors under double taxation treaties.