The Organisation for Economic Co-operation and Development (OECD) is launching a new initiative in 2025 that could reshape international tax compliance. The pilot project uses blockchain technology to modernise withholding tax (WHT) systems, especially for cross-border dividend tax recovery. For institutional investors, this development may simplify reclaim procedures and enhance transparency in global tax administration.
This blog explores how the OECD’s blockchain pilot works, what it means for investors, and how it could transform WHT reclaims.
The OECD’s Vision for Digital WHT Reform
The OECD has led major international tax reforms in recent years. Its Base Erosion and Profit Shifting (BEPS) initiative and Global Minimum Tax plan aims to reduce avoidance and improve transparency. The 2025 blockchain pilot is part of that digital strategy, focused on fixing inefficiencies in current WHT systems.
Reclaiming WHT on dividends is often complex. Investors face long delays, vague rules, and poor visibility across custodial chains. These issues can lead to excess tax withheld and rejected claims. The blockchain pilot offers a secure digital platform that records tax-relevant information in real time. This aims to streamline the reclaim process and help investors access treaty benefits more efficiently.
How the Blockchain Pilot Will Work
Blockchain is a shared digital ledger that records and verifies transactions across multiple parties. It doesn’t require a central authority. In this pilot, the OECD plans to use blockchain to track each stage of a cross-border investment. This includes the initial dividend payment and the final investor who holds treaty rights.
The system will verify treaty entitlements automatically and apply the correct WHT rate at the time of payment. This change could eliminate the need for post-payment claims. Unlike traditional systems that depend on delayed reports and manual forms, the blockchain ledger would provide real-time access to verified data.
What It Means for Investors
The pilot could greatly benefit investors who receive foreign dividends. Many currently pay the full statutory WHT rate because beneficial ownership details are not verified in time. This forces them to reclaim the excess, often through slow and uncertain processes.
With blockchain, tax authorities could see who is entitled to a reduced rate immediately. The correct WHT rate could be applied at source, removing the need to file a separate claim. This could improve cash flow and reduce operational costs for institutional investors.
The system’s transparency also reduces errors and fraud. When data flows accurately across the investment chain, there is less risk of mismatches or missing documentation. That means fewer denied claims and faster refunds for investors.
The Role of Intermediaries in the WHT Chain
Intermediaries—such as custodians and brokers—are essential in the WHT process. However, they often do not share information efficiently with tax authorities. This causes problems when proving treaty entitlements.
The blockchain pilot changes this by having intermediaries input relevant data directly into the ledger. Each link in the chain, from the dividend issuer to the beneficial owner, becomes visible in one system. This allows tax authorities to follow the full trail and apply the right WHT rate.
Although intermediaries may need to update systems and adopt new workflows, the long-term advantages are clear. A single, reliable source of tax information can reduce compliance risks and streamline cross-border investment processes.
Limitations and Concerns
Blockchain technology offers major benefits, but it also presents challenges. Data privacy is one of the biggest concerns. Withholding tax data is sensitive, and the OECD must design safeguards to protect investor confidentiality.
Another challenge is global coordination. Different countries follow different tax rules and use different data formats. For the pilot to succeed, participating nations must agree on shared standards. Without this, the blockchain network could become fragmented and less effective.
Some investors and institutions, especially in emerging markets, may lack the tools needed to join a digital system. Ensuring equal access and support will be crucial for broad adoption.
Effects on Dividend Tax Reclaims
If the pilot succeeds, WHT relief could shift from a manual post-payment process to a real-time automated one. Treaty rates would apply immediately, and investors would no longer need to wait months—or even years—for a refund.
The blockchain approach also reduces common reclaim errors. Missing documents, inconsistent forms, and mismatched ownership details could become issues of the past. For institutional investors with large global portfolios, the time and cost savings could be substantial.
Tax authorities would benefit, too. Blockchain’s built-in audit trail allows them to spot fraud and non-compliance early. It also improves data accuracy and reporting. This may build more trust between governments and foreign investors.
Preparing for the Digital Shift in WHT Recovery
While the OECD has not confirmed the full list of participating countries, several EU and G20 states are likely to join the pilot. The blockchain platform will not replace existing reclaim processes right away. Instead, it will run alongside traditional systems during the early stages.
Investors should start preparing now. They can speak with custodians and tax recovery firms to understand how their current systems align with the new framework. Staying informed about regulatory updates and investing in digital readiness will be key to navigating the changes.
Global Tax Recovery is closely monitoring the pilot and advising clients on what steps to take. We help investors adapt early, ensuring they are ready for a faster, more transparent WHT recovery process.
Conclusion
The OECD’s 2025 blockchain-based WHT pilot could change how investors recover dividend tax across borders. By using real-time data and automated systems, it promises faster and more accurate withholding tax relief. The shift will not be without challenges, but the long-term gains could be considerable.
Investors, intermediaries, and tax authorities alike stand to benefit from more transparency, better compliance, and improved efficiency. As global tax systems evolve, adapting to these changes early will be vital. With the right tools and support, reclaiming excess withholding tax may soon become simpler, faster, and far more reliable than ever before.
