In today’s financial landscape, where cost pressures, client expectations, and regulatory complexity continue to intensify, banks are re-evaluating long-held assumptions about how value is created – and where it may be lost. One process now drawing increased scrutiny is the reclaiming of foreign withholding taxes.
Often treated as a purely operational or compliance matter, withholding tax reclaims have remained in the shadow of core banking services. Yet their inefficiency carries real financial implications, both for the institution and its clients. According to the European Commission in 2016, the estimated amount of forgone tax relief and opportunity costs under the scope of double tax treaties reaches more than 8.4 billion euros in Europe annually.
The Challenge Behind Withholding Tax Reclaims
The premise is simple: when banks or their clients invest across borders, they’re often entitled to refunds on foreign withholding taxes. The execution, however, is anything but.
The reclaim process involves navigating dozens of jurisdictions, treaties, and administrative requirements. Each country has its own timelines, forms, evidentiary standards, and deadlines. Many require original documents, client signatures, or bank certifications for every single claim.
Even when a claim is successful, refunds can take years – assuming nothing goes wrong along the way. Given this complexity, it’s unsurprising that a significant portion of eligible reclaims are never pursued. For many institutions, the process simply isn’t worth the internal effort required to support it and therefore they sometimes choose to file only high-value claims – or none at all.
Available Models: Approaches And Their Operational Trade-Offs
Banks have taken a variety of approaches to manage the complexities of withholding tax reclaims – each shaped by institutional priorities, client profiles, and operational capabilities. These models reflect different philosophies in handling a technically demanding process.
- In-house teams
Many institutions, particularly larger private or universal banks, maintain dedicated tax operations or client service teams to handle reclaims internally. This model allows for maximum customisation and close alignment with internal workflows. However, it can be resource-intensive and difficult to scale across jurisdictions. Knowledge tends to reside with specific individuals, and continuity can become a challenge over time. - Traditional outsourced service providers
Specialised consulting firms offer withholding tax reclaim services as part of broader tax advisory practices. These providers contribute jurisdictional expertise and regulatory depth. In most cases, however, operational execution – such as collecting documentation, managing timelines, and following up on claims – still involves active participation from the bank’s internal teams. - Software providers
There are various specialised companies that provide banks with a dedicated tax reclaim software, offering automation of forms, documentation tracking, and improved process visibility. These platforms can support efficiency and standardisation, particularly when integrated into broader back-office systems. However, they require onboarding, internal process alignment, and continued operational involvement. The bank remains responsible for the overall execution and data accuracy.
Each of these models supports specific needs and risk appetites. However, they typically maintain a higher degree of operational burden within the institution, which can limit scalability and divert resources from core strategic functions.
Beyond Partial Solutions: Reclaiming As A Fully Automated Service
For institutions seeking a fully streamlined and scalable solution, an alternative model is to treat withholding tax reclaiming as a comprehensive managed service. Rather than supporting parts of the process, this model shifts full operational ownership to the dedicated provider. Currently, Furado offers the highest level of automation on the market, enabling it to manage the entire reclaiming process – from checking the eligibility and communicating with tax authorities to transferring the reclaimed amount back to the client. This approach helps banks to focus on delivering a consistent and high-quality client experience. Internal resources are freed up, operational risk is reduced, and clients benefit from faster, more transparent tax refunds – without added complexity or effort.
What Does This Mean for Banks and their Relationship Managers?
For private banks and wealth management institutions serving international clients, the impact of this model spans several core benefits:
- Higher automation and efficiency: Manual workloads are replaced by structured, digitised processes that scale without growing headcount.
- Superior client experience and satisfaction: Clients receive faster refunds, clearer communication, and fewer administrative requests.
- Zero investment required: Banks don’t need to licence new software, allocate internal resources, or implement complex systems.
Ultimately, an optimised reclaiming process reflects a bank’s ability to deliver invisible excellence – efficiently returning value to clients and the bank, without friction or delay.
Conclusion: From Administrative Burden to Strategic Asset
Withholding tax reclaims have traditionally been treated as a necessary but complex operational task – often left in the background due to their administrative weight. But as the link between operational excellence and client satisfaction becomes increasingly clear, this area is beginning to receive the attention it deserves.
For many institutions, the question is no longer whether to reclaim withholding tax, but how to do so in a way that is scalable, efficient, and client centric. New service models now make it possible to simplify complexity, reduce internal workload, and deliver meaningful value – without adding costs or pressure on teams or systems.