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1 Global Tax Services Global Tax Services William Salva, Director, William Salva, Director, International Tax Services International Tax Services Product Management, DTCC Product Management, DTCC ACSDA Leadership Forum ACSDA Leadership Forum October 9, 2007 October 9, 2007

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Global Tax Services. ACSDA Leadership Forum October 9, 2007. William Salva, Director, International Tax Services Product Management, DTCC. Cross-Border Investment. Cross-border investment continues to grow because investors:. Look for the most attractive growth opportunities - PowerPoint PPT Presentation

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Page 1: Global Tax Services

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Global Tax ServicesGlobal Tax Services

William Salva, Director, William Salva, Director, International Tax Services International Tax Services Product Management, DTCCProduct Management, DTCC

ACSDA Leadership ForumACSDA Leadership ForumOctober 9, 2007October 9, 2007

Page 2: Global Tax Services

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Cross-Border InvestmentCross-Border Investment

•Look for the most attractive growth opportunities

•Seek to mitigate risk/volatility by diversifying

•Look for the most attractive growth opportunities

•Seek to mitigate risk/volatility by diversifying

Cross-border investment continues to grow because investors:

Cross-border investment continues to grow because investors:

Page 3: Global Tax Services

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Cross-Border Income TaxationCross-Border Income Taxation

Cross-border dividend and interest income can be taxed at high withholding rates established by the source country, called the statutory rate.

Investors are often entitled to reduced rates of withholding established by bilateral tax treaties or source country domestic legislation, referred to as the treaty rate.

Cross-border dividend and interest income can be taxed at high withholding rates established by the source country, called the statutory rate.

Investors are often entitled to reduced rates of withholding established by bilateral tax treaties or source country domestic legislation, referred to as the treaty rate.

Page 4: Global Tax Services

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Complex Cross-Border RegulationsComplex Cross-Border Regulations

Regulations matrix constantly changing:

• Bilateral tax treaties and unilateral domestic legislations

• Multiple treaty rates

• Beneficial owner definitions and eligibility qualifications

• Foreign tax forms and documentation requirements

• Language and cultural barriers

Regulations matrix constantly changing:

• Bilateral tax treaties and unilateral domestic legislations

• Multiple treaty rates

• Beneficial owner definitions and eligibility qualifications

• Foreign tax forms and documentation requirements

• Language and cultural barriers

Page 5: Global Tax Services

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Traditional Tax ReliefTraditional Tax Relief

Post-event reclaim process:Post-event reclaim process:

•Costly

•Complex

•Inefficient

•Time-consuming

•Costly

•Complex

•Inefficient

•Time-consuming

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DTC’s Global Tax ServicesDTC’s Global Tax Services

ForeignForeign::• TaxReliefTaxRelief• TaxInfoTaxInfo

U.SU.S.:.:• Tax Information Reporting Tax Information Reporting ServiceService• Tax Withholding ServicesTax Withholding Services

Solutions for navigating complex cross-border tax matters – withholding regulations, relief, and reporting requirements.

Solutions for navigating complex cross-border tax matters – withholding regulations, relief, and reporting requirements.

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Foreign TaxReliefForeign TaxRelief

•Electronic communications system

•Facilitates tax relief at source or via accelerated refund

•Select foreign dividend and interest income payments

•Qualifying beneficial owners – U.S. / Non-U.S.

•Arrangements set up with issuers, agents or foreign tax authorities

•Electronic communications system

•Facilitates tax relief at source or via accelerated refund

•Select foreign dividend and interest income payments

•Qualifying beneficial owners – U.S. / Non-U.S.

•Arrangements set up with issuers, agents or foreign tax authorities

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Benefits of DTC’s Foreign TaxRelief ServiceBenefits of DTC’s Foreign TaxRelief Service

• Mitigates foreign exchange risk

• Improves return on investment

• Creates secure electronic records

• Simplifies record keeping

• Reduces or eliminates documentation requirements (e.g. IRS Form 6166 and foreign tax forms) and paper waste

• Increases accuracy and thus opportunity of obtaining relief

• Mitigates foreign exchange risk

• Improves return on investment

• Creates secure electronic records

• Simplifies record keeping

• Reduces or eliminates documentation requirements (e.g. IRS Form 6166 and foreign tax forms) and paper waste

• Increases accuracy and thus opportunity of obtaining relief

• Easy and efficient• Easy and efficient • Low cost• Low cost • Fast payment• Fast payment

Page 9: Global Tax Services

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Foreign TaxReliefForeign TaxRelief

1996 $163 million1996 $163 million

1997 $242 million1997 $242 million

1998 $247 million1998 $247 million

1999 $237 million1999 $237 million

2000 $334 million2000 $334 million

2001 $532 million2001 $532 million

2002 $549 million2002 $549 million

2003 $702 million2003 $702 million

2004 $939 million2004 $939 million

2005 $1.34 billion2005 $1.34 billion

2006 $ 1.60 billion 2006 $ 1.60 billion

2007 YTD $1.39 2007 YTD $1.39 billionbillion

0

200

400

600

800

1000

1200

1400

1600

'96 '98 '00 '02 '04 '06

Millions

Amount of withholding tax relief secured by Participants via Elective Dividend Service has increased ten-fold over the last ten years.

Amount of withholding tax relief secured by Participants via Elective Dividend Service has increased ten-fold over the last ten years.

Page 10: Global Tax Services

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Foreign TaxRelief – Countries CoveredForeign TaxRelief – Countries Covered

• Canada

• Estonia

• Finland

• France

• Germany

• Indonesia

• Ireland

• Israel

• Canada

• Estonia

• Finland

• France

• Germany

• Indonesia

• Ireland

• Israel

• Japan

• Korea

• Netherlands

• Norway

• Puerto Rico

• Spain

• Sweden

• Switzerland

• Japan

• Korea

• Netherlands

• Norway

• Puerto Rico

• Spain

• Sweden

• Switzerland

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Quick and concise identification by country:

• Beneficial owner definitions

• Withholding tax rates applicable by beneficial owner type

• Documentation requirements

• Other country-specific rules, regulations, and procedures

Quick and concise identification by country:

• Beneficial owner definitions

• Withholding tax rates applicable by beneficial owner type

• Documentation requirements

• Other country-specific rules, regulations, and procedures

Foreign TaxInfo - Foreign tax withholding and relief information

Foreign TaxInfo - Foreign tax withholding and relief information

Determine tax relief entitlements on foreign income paymentsDetermine tax relief entitlements on foreign income payments

Reduce response time to customer inquiriesReduce response time to customer inquiries

Page 12: Global Tax Services

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U.S. Tax WithholdingU.S. Tax Withholding

• For Non-U.S. Participants: Must be a “Qualified Intermediary” to obtain tax relief www.irs.gov (Search QI)

• U.S. Securities: Available on U.S. source income

• Payments Net of Tax: Enables favorable withholding rates at source• Treaty Rates, Statutory Rates, Exempt Rate (e.g. Portfolio Interest Exemption, U.S. Residents).

• Withholding & Reporting: DTC withholds tax & remits to IRS.

• Year End Reporting: 1042-S Tax Forms.

• For Non-U.S. Participants: Must be a “Qualified Intermediary” to obtain tax relief www.irs.gov (Search QI)

• U.S. Securities: Available on U.S. source income

• Payments Net of Tax: Enables favorable withholding rates at source• Treaty Rates, Statutory Rates, Exempt Rate (e.g. Portfolio Interest Exemption, U.S. Residents).

• Withholding & Reporting: DTC withholds tax & remits to IRS.

• Year End Reporting: 1042-S Tax Forms.

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Qualified Intermediary BenefitsQualified Intermediary Benefits• Tax Treaty with the U. S.: Qualified Intermediaries (QIs) can receive treaty rates on Dividends and Interest• www.irs.gov (Publication 515)

• No Tax Treaty with the U.S.: Portfolio Interest Exemption

• Know your customer (KYC) rules: Required for Portfolio Interest Exemption

• QI Responsibilities: • Year End IRS Reporting (1099 for U.S. holders & 1042-S for non-U.S. holders)

• Documentary Evidence of Customers – do not have to disclose to DTC

• QI Audit

• KYC Rules

• Full list of Requirements on IRS Website

• Consult Tax Advisors

• Tax Treaty with the U. S.: Qualified Intermediaries (QIs) can receive treaty rates on Dividends and Interest• www.irs.gov (Publication 515)

• No Tax Treaty with the U.S.: Portfolio Interest Exemption

• Know your customer (KYC) rules: Required for Portfolio Interest Exemption

• QI Responsibilities: • Year End IRS Reporting (1099 for U.S. holders & 1042-S for non-U.S. holders)

• Documentary Evidence of Customers – do not have to disclose to DTC

• QI Audit

• KYC Rules

• Full list of Requirements on IRS Website

• Consult Tax Advisors

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Domestic Tax Reporting (DTax) & Tax Information Reporting Service (TIRS)Domestic Tax Reporting (DTax) & Tax Information Reporting Service (TIRS)

• Payment Reclassification: Often, income from certain securities is reclassified at year end for tax reporting purposes

• DTax / TIRS: Comprehensive year-end tax information reporting service (1099 and 1042-S)

• Domestic U.S. Securities covered: • Mutual Funds,

• REITs (real estate investment trusts),

• UITs (unit investment trusts),

• MLPs (master limited partnership),

• OID (original issue discount) for REMICs (real estate mortgage investment conduits) and CDOs (collateralized debt obligations)

• Broadridge Financial Services: Partnership• www.broadridge.com/investor-communications/us/bank-broker/tax-information-

reporting-services.asp

• Payment Reclassification: Often, income from certain securities is reclassified at year end for tax reporting purposes

• DTax / TIRS: Comprehensive year-end tax information reporting service (1099 and 1042-S)

• Domestic U.S. Securities covered: • Mutual Funds,

• REITs (real estate investment trusts),

• UITs (unit investment trusts),

• MLPs (master limited partnership),

• OID (original issue discount) for REMICs (real estate mortgage investment conduits) and CDOs (collateralized debt obligations)

• Broadridge Financial Services: Partnership• www.broadridge.com/investor-communications/us/bank-broker/tax-information-

reporting-services.asp

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Questions? Questions?