Ross McGill, Director of Marketing of GlobeTax explains, âHistorically Eurobonds have been deemed tax exempt. Recently however, some European governments have changed their position, notably Spain and Portugal so far. The effective position however still remains that the holders of Eurobonds may be entitled to an exemption or application of treaty rate tax on Eurobond coupon payments, but they will have to demonstrate entitlement as holders of other securities must do in order to be treated at the âfavorable rateâ by the country of issue.â
âApproximately 10,000 (5%) of Eurobond coupon distributions are currently taxable, notes McGill. The ICSDs already provide the market with a âGlobal Tax Procedureâ under which relief at source or quick refunds can be obtained in many cases but,â as McGill points out, âthere will still be âmissesâ in the market where Eurobond holders are unable to provide the required documentation either, within the time frames provided by the procedure, or because the chain of ownership makes it impossible.â âIn those cases,â continues McGill, âthe holder may still have an entitlement to recover tax using a long form process.
âThe Protocol we have designed is V-STP and leverages our SWIFT based Tax Reclaim Service Bureau (TRSB) to receive all data and documentation electronically. Any of the players in the market, depending on their needs, can subscribe to the Protocol. Paying Agents and their customers - the Issuers, can now react to concerns that their ability to raise capital may be impacted, by ensuring that they have a front to back process fully defined to optimize the tax position of holders. ICSDs can similarly subscribe to create a complete process for their customers the custodians. If by any chance, coupon payments reach Eurobond holders net of statutory tax, the custodians themselves can also subscribe directly.â
Martin S. Foont, GlobeTaxâs President and CEO said, âOur aim in implementing this protocol is to address the market need. Weâve created a complementary service to existing processes that will ensure that investors always have the opportunity via their intermediaries, to optimize their tax position.â