GlobeTax - Eurobond

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Eurobond Services

Certain markets are now deducting statutory rate tax on Eurobond coupon distributions. Most Eurobonds are deemed to be tax exempt, but the number which are now taxed stands at 5% (Source: ICMSA) and is expected to grow. In other words, markets are effectively taking the view that exemption is an attribute of the bond-holder and not an attribute of the financial instrument. The net result is that many recipients may be entitled to an exemption or treaty rate taxation.

In some markets where tax is attributable to the coupon distribution, ICSDs have two tax optimization methods already in place. These are the Relief at Source method and the Quick Refund method. Both methods require documentation, including certificates of residency, from beneficial owners to be supplied to the ICSDs within very tight time frames. If this is obtained, the ICSD will pay the distribution gross.

However, while perhaps small in number, there is still a potential that documentation is not available to support the relief at source or quick refund process. In these cases the distribution may be made net of statutory rate withholding tax. This does not remove the fact that there may be an entitlement to exemption or reduced withholding. However until now, there has been no market protocol to allow for automated long form reclaims in the same way as the short form.

The availability of an automated long form process has clear benefits for paying agents, ICSDs and custodians. Paying Agents are able to offer their customers, the Issuers, added value services which, due to the completeness of the process, attract more favorable investor attention. ICSDs and custodians are able to demonstrate to their customers, the custodians and beneficial owners, that tax optimization of Eurobonds is an integrated process that optimizes the investor's tax position. GlobeTax implements the Eurobond Long Form Protocol using TRSB and receives income data and certificates of residency electronically via SWIFT ISO15022 message formats and FileAct.

Who can use the Protocol?

Paying Agents

Paying Agents can subscribe to the protocol to deliver a range of benefits to (Upstream) Issuers and (Downstream) Asset Servicers (custodians) and their clients. Examples of upstream products supported by the Long Form Protocol include Bond-holder Value Enhancement Programs.

ICSDs

ICSDs can subscribe to the Long Form Protocol to add reclaim processing to their existing relief at source and quick refund processes in order to offer the market a "turn-key" solution to the taxation of Eurobonds. TRSB supports STP transfer of electronic certificates of residency.

Custodians

Custodians can subscribe to the Long Form Protocol and use their direct connection to TRSB to automate withholding tax recovery on Eurobond distributions. TRSB supports automated transfer of certificates of residency and reporting of status and expected recovery dates for tax receivables.

Fees

All transactional fees are contingent and remedial. If no tax is recovered, no fees are due. One-off connection or set-up fees may apply. Please contact us for a quotation.

Data Protection

GlobeTax requires personal data regarding beneficial owners of securities in come. Information about subscribers and beneficial owners is held in electronic form in the USA. GlobeTax is a certified signatory to the Safe Harbor Act approved by the EU Commission on Data Protection. Please click here to see our privacy policies and rules.

To Download the Eurobond Services Fact Sheet, please click here