Wednesday, July 3, 2019
The European Securities and Markets Authority (ESMA) has published the findings of its preliminary study of multiple withholding tax (WHT) reclaim schemes. ESMA conducted this preliminary study at the request European Parliament (EP) and has launched another more formal inquiry to gather further evidence from national competent authorities (NCAs) on the supervisory practices and experience regarding those schemes.
The study published on July 2, 2019 assesses how widespread WHT reclaim schemes are across the EU and any potential methods for preventing and detecting them. While WHT schemes are not strictly illegal and "do not necessarily imply breaches of the market abuse or short selling regimes, they may affect the integrity of securities markets and individual firms." ESMA found that WHT reclaim transactions are being investigated in Germany, Denmark, and Austria.
In the report, ESMA identified best practices that could be used by NCAs to detect and investigate multiple WHT reclaim schemes. These include:
As a follow on, ESMA has launched a formal inquiry intended to gather "additional information on the nature of the entities involved and assess the potential involvement of other vehicles or funds set up through shells in other jurisdictions." This follow-up report will focus on
ESMA will submit the results of the formal inquiry to the European Parliament.