While the vast majority of publicly traded securities is now held through a complex network of domestic and foreign intermediaries, few countries have adapted their withholding tax collection and relief procedures to recognize this multi-tiered holding environment. It is therefore often difficult of impossible to make an effective claim for withholding tax relief.
The OECD Treaty Relief and Compliance Enhancement (TRACE) initiative therefore has developed the Authorised Intermediary (AI) system. This standardised system allows the claiming of withholding tax relief at source on portfolio investments. It removes the administrative barriers that affect the ability of portfolio investors to effectively claim the reduced rates of withholding tax to which they are entitled pursuant to tax treaties or to domestic law of the country of investment. It minimises administrative costs for all stakeholders and enhances the ability of both source and residence countries to ensure proper compliance with tax obligations.
This document contains the structure of the TRACE XML Schema, as well as a User Guide, as approved by the Committee on Fiscal Affairs in February 2020. It provides guidance on the standardised electronic format to be used for reporting TRACE-related information by financial institutions to tax administrations and for the exchange of information between tax administrations. It is intended to complement the TRACE Implementation Package, which sets out the procedures, forms and agreements to be put in place to operationalise the TRACE AI system.