Overview
A Canadian pension fund with in excess of CAD 10+ billion in assets faced a common but often overlooked challenge—excess withholding tax eroding investment returns. While pension teams focus on asset allocation, liability management, and meeting beneficiary obligations, withholding tax recovery is rarely considered a strategic priority.
However, unclaimed withholding tax represents lost capital that could directly strengthen the fund’s financial position and improve its ability to meet long-term liabilities.
With limited internal resources and no specialized tax reclaim expertise, the pension fund struggled to efficiently track and recover withholding tax on its foreign investments. WTax stepped in to fully outsource the process, removing the administrative burden while ensuring maximum recovery.
Through our partnership, we identified an additional CAD 12.5 million in reclaimable tax, significantly enhancing the pension’s financial position.
Client Challenges
Limited internal expertise
Pension teams are not withholding tax specialists and do not have the time or knowledge to navigate complex international tax treaties and reclaim processes.
Administrative burden
Recovering withholding tax requires extensive documentation, jurisdiction-specific compliance, and ongoing engagement with tax authorities, straining an already resource-constrained team.
Unclear financial impact
Without visibility into the full scope of recoverable tax, the pension fund faced uncertainty in accounting for withholding tax refunds, affecting cash flow projections and financial planning.
Fiduciary responsibility
Ensuring every recoverable dollar is reclaimed is a key aspect of acting in the best interests of beneficiaries, yet manual, in-house processes made this difficult to achieve.
The WTax Solution
1. Fully Managed Withholding Tax Recovery
- WTax assumed end-to-end responsibility for the reclaim process, ensuring all eligible taxes were recovered without requiring the pension team to manage complex filing requirements.
- We liaised directly with custodians, tax authorities, and other intermediaries to obtain necessary documentation, reducing the operational burden on the pension team.
2. Maximizing Recovery Through Expertise & Technology
- By applying the optimum mix of reclaim methodologies, WTax identified CAD 12.5 million in additional recoveries that had previously gone unclaimed.
- Our process ensured that every applicable tax treaty and other type of withholding tax benefit was claimed, minimizing tax leakage.
- Our process ensured all claims are filed in the year following income payment, thereby minimizing the time to return capital for reinvestment.
3. Enhancing Financial Position & Beneficiary Security
- This recovered capital will directly strengthen the pension fund’s ability to meet future beneficiary payments and improve funding ratios.
- Recovering every eligible dollar allows the fund to better meet its fiduciary duty to maximize beneficiary returns.
Results & Impact
For pension funds, unclaimed withholding tax is a missed opportunity to enhance financial stability and secure plan assets. Without specialized expertise, recovering every eligible dollar is nearly impossible, yet doing so is essential to fulfilling fiduciary duties.
By outsourcing to WTax, this Canadian pension fund maximized its recoveries, reduced administrative strain, and strengthened its ability to meet future beneficiary obligations.
