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GOAL Launches New Internet Tax-Reclaim Service

by Carla Johnson, Investors

27 December 2005

Responding to what it says is is demand from private investors, GOAL, a tax reclamation services specialist, announced last week the launch of eReclaim, a secure, online service aimed at recovering some, or all, of the tax that is imposed by foreign governments on cross-border dividend income.

GOAL says that its new service responds to growing demand for easier ways of reclaiming overpaid tax, and can equally be adopted as an in-house application by tax practitioners, financial advisers and banks as a value-added service for their customers.

When private investors in the UK - and for that matter in other countries - receive dividend income from overseas investments, it is likely that tax has been deducted twice - in the country where the dividend is paid, and by investor's own government.

Generally, taxation treaties exist between countries to allow investors to reclaim over-withheld tax on income they receive – but the reclamation process is complex and laborious. Consequently, an estimated 90% of reclaimable tax lies unreclaimed by private investors – leaving in the case of the UK just over a quarter of a billion pounds (GBP251m) languishing with foreign tax authorities – and representing a loss of around 13-14% of overall dividend returns in the UK market.

The GOAL eReclaim application is used by investors to input information on the claim (such as the country that the dividend was received from, the type of security/stock, the paydate of the shares). It then calculates how much could be reclaimed and automatically pre-populates the relevant tax form with the information. The form is then ready for printing and can be sent off by the applicant to the relevant tax authorities. A free demonstration is available on GOAL's website where investors can calculate what they could get back. The cost of the service for private individuals is fixed at 15% of their reclaim (or a minimum of GBP10.)

Although the global average proportion of foreign securities in a portfolio is 20%, the most significant losses are undoubtedly shouldered by individuals with large investment portfolios, and those with a high proportion of foreign securities. Furthermore, with the continued popularity of dividend payouts, the losses due to non-reclamation of tax on foreign securities are expected to escalate.

Stephen Everard, Managing Director, GOAL, comments, “The market is ripe for a product that helps private individuals recover withholding tax in a simple, cost-effective way, and we are confident that eReclaim will meet this demand. We predict that take-up will be particularly strong amongst financial intermediaries, for whom the tool provides a new element of service delivery as they can help their clients maximise return on investment from securities portfolios.

“Awareness of tax reclamation is far higher in the institutional investment arena, with an estimated 70% of reclaimable tax actually being recovered, and reclamation services are generally offered by custodian banks to their fund manager clients. It is scandalous that this is not the case for private investors and their advisers.”

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