Changes in Sweden, Germany, Denmark and Switzerland are reshaping how institutional investors preserve dividend returns. The common challenge is no longer simply identifying the statutory rate or filing a reclaim. It is whether legal entitlement, securities-lending arrangements, custody-chain data, documentation and accountable operating models can work together to convert gross dividend income into realised post-tax performance.

Withholding tax has often been treated as a procedural matter, delegated to custodians, reclaim agents and operations teams. That framing is increasingly inadequate. For pension funds, sovereign investors, asset managers and other fiduciary institutions, the ability to secure treaty relief, evidence beneficial ownership and manage the contractual effect of dividend-date arrangements can materially affect realised portfolio returns.

Four European markets illustrate why. Sweden has introduced a new exemption for certain foreign states and public-law bodies. Germany’s MiKaDiv regime will place withholding-tax data and custody-chain evidence into a more formal reporting environment. Denmark’s Supreme Court has reopened the possibility of recovering claims previously rejected as out of time. Switzerland continues to impose a structurally demanding post-payment reclaim process.

The legal issues differ, but their practical message is consistent. A statutory entitlement has limited value if the institution cannot prove and operationalise it. The question concerns more than the technical application of domestic tax law. It concerns whether information can pass reliably through a custody chain, whether legal ownership and economic exposure are properly aligned, whether securities-lending agreements allocate tax consequences coherently and whether tax, investment, legal, operations and data teams can establish a credible account of entitlement.

That is why withholding tax should now be viewed as a component of investment governance. A fund that cannot preserve its legitimate dividend-tax entitlement may experience a material difference between gross investment performance, expected post-tax return and realised post-tax return. Depending on the institution, its mandate and the governing legal framework, that difference may engage fiduciary responsibilities as well as investment and operational oversight.

Sweden Shows Why Law is Not Enough

Sweden’s recent reform provides a useful illustration. On 20 May 2026, the Riksdag approved amendments to the Coupon Tax Act (1970:624) introducing an exemption from Swedish coupon tax for qualifying foreign states and certain foreign public-law bodies forming part of those states. The exemption also extends to qualifying foreign equivalents of Swedish regions, municipalities and municipal federations. A foreign state, or qualifying equivalent entity, must be situated within the EEA or in a state with which Sweden has entered into a tax treaty or other agreement providing for exchange of tax information.

The amendments entered into force on 1 July 2026 and apply to dividends whose dividend date occurs after 30 June 2026. The standard Swedish coupon-tax rate remains 30 per cent, subject to reductions available under an applicable tax treaty. The Government Bill 2025/26:91, the Riksdag’s decision and the Swedish Government’s 2026 Calculation Conventions set out the legislative and rate position.

The exemption is straightforward in statutory terms. Its commercial implications are less so where Swedish shares are subject to securities lending across the relevant dividend date.

A securities loan can separate legal title, economic exposure and dividend-related payment flows. The party receiving the underlying dividend, the party receiving a manufactured or equivalent payment and the party whose tax treatment was assumed when the loan was priced may not be the same. The resulting tax outcome depends not merely on the new Swedish exemption but on the particular lending documentation, including tax representations, manufactured-payment provisions, gross-up or indemnity clauses, recall mechanics and relevant elections incorporated into the GMSLA or associated agreements.

A loan outstanding across a post-1 July 2026 dividend event may have been priced against assumptions that no longer reflect the withholding treatment of the underlying dividend. That does not, by itself, establish a contractual shortfall or adjustment entitlement. In some arrangements, the manufactured payment may be calculated by reference to the lender’s tax position. In others, it may reflect the borrower’s position, the gross dividend, a net-of-tax amount or a bespoke contractual formula. The answer turns on the actual agreement and the surrounding settlement arrangements.

The important point is broader. An investor cannot assess the value of a statutory exemption in isolation. It needs to map the exemption against legal title, dividend entitlement, lending documentation, custody processing and the evidence required to support the relevant tax treatment. The decisive question is whether the organisation’s arrangements allow the favourable rate to be achieved in practice.

Legitimate Lending & Dividend-Arbitrage Risk

The interaction between securities lending and withholding tax requires careful distinction. Securities lending performs established market functions, including liquidity provision, settlement efficiency, collateral transformation, hedging and support for short-selling activity. It should not be conflated with tax-driven dividend-arbitrage arrangements. For earlier analysis of similar questions in the Norwegian market, see Norway, Securities Lending and Dividend Withholding Tax (Ali Kazimi, 5 February 2026).

At the same time, the separation of legal title, economic exposure and dividend entitlement can create conduct and tax risk where transactions are structured principally to obtain a tax outcome without sufficient economic substance. The enforcement environment remains active. On 8 January 2026, the Paris Judicial Court validated a convention judiciaire d’intérêt public, or CJIP, between the Parquet National Financier and HSBC Bank plc in relation to allegations concerning historic dividend-arbitrage arrangements involving HSBC’s Paris branch and London-based HSBC teams between 2014 and 2019. HSBC agreed to pay a public-interest fine of €267.531 million, while the PNF separately recorded that €34.464 million of tax, interest and penalties relating to 2019 had already been paid. The PNF’s press release of 8 January 2026 records the terms of the resolution.

The governance lesson is not that institutional investors should withdraw from securities lending. It is that institutions should be capable of reconstructing who held legal title, who bore the relevant market risk, who received the economic benefit of the dividend and which entity claimed tax relief. Where those answers cannot be reconciled across lending, custody and tax records, a withholding-tax issue can become a conduct, financial-crime and reputational issue.

Germany Makes Evidence Central

Germany’s MiKaDiv reporting framework provides a different expression of the same underlying issue. The regime, contained principally in sections 45b and 45c of the Income Tax Act, requires structured information concerning dividend transactions to flow through the custody chain, with prescribed reporting ultimately made to the Federal Central Tax Office. It is scheduled to apply from 1 January 2027 to relevant dividend income received after 31 December 2026. See Section 45c EStG, the Federal Ministry of Finance’s guidance of 22 April 2025 and the BZSt guidance on individual questions relating to data transmission.

MiKaDiv does not require every participant in the custody chain to transmit every data point directly to the tax authority. Rather, relevant information must be collected, retained and passed through the chain so that the appropriate party can make the required reporting. The framework encompasses information concerning custody-chain participants, holdings, financial arrangements and relevant transaction activity, including securities lending, disposals and return transfers.

WTS Hansuke has been working with market participants on these implementation questions. The WTS Hansuke and RAQUEST MiKaDiv Industry Whitepaper, published in May 2026 following an industry workshop and broader market engagement, examines the operational and reporting challenges in greater detail.
That information matters because Germany already applies special ownership, holding-period and risk requirements to certain withholding-tax relief claims. For non-resident investors within the statutory scope of section 50j EStG, and subject to its exceptions, the special conditions include continuous economic ownership for at least 45 days within the relevant period surrounding the dividend due date, exposure to at least 70 per cent of the relevant downside risk, and restrictions on obligations to pass on all or most of the dividend income. See the BZSt’s guidance on section 50j EStG.

MiKaDiv therefore changes more than the reporting process. It places the ownership, transaction and return-transfer information needed to support tax entitlement into a more structured and digitally transmissible environment. A beneficial-ownership position that appears sound in a tax memorandum may be difficult to sustain if securities-lending, settlement, collateral and custodian records cannot be reconciled to the relevant dividend event.

For investors and intermediaries, the central question is whether the custody chain can produce coherent and reconcilable evidence that the legal test has been met.

Denmark Reopens Claims, Not Proof

Denmark’s recent development demonstrates that procedural law can be economically decisive. On 11 June 2026, the Danish Supreme Court held that non-resident taxpayers’ claims for repayment of excess Danish withholding tax on dividends and royalties are subject to the special five-year limitation period, rather than the three-year period previously applied by the Danish Tax Agency from 2016. The Danish Tax Agency has confirmed that the limitation period for refund claims has changed from three years to five years. See Danish Supreme Court, joined cases BS-36976/2025-HJR and BS-36974/2025-HJR, 11 June 2026.

The Agency states that relevant cases will be reopened automatically and that it expects all relevant cases to have been reopened before the end of 2026. See the Danish Tax Agency’s guidance on claiming refund of Danish dividend tax.

The decision potentially unlocks value for non-resident investors whose claims were rejected solely because they were treated as out of time. But the reopening does not eliminate the substantive conditions for relief. A claim revived procedurally must still be supported by the evidence needed to establish tax residence, applicable treaty entitlement, beneficial ownership and dividend entitlement.

This creates a practical issue for securities-lending programmes. Where an investor’s entitlement depends on its ownership position at the legally relevant point in the dividend process, a recall completed after that point may not repair the tax position. The analysis must therefore extend beyond standard ex-date operational assumptions. Tax, securities-lending and operations teams need a common understanding of the applicable entitlement date, the relevant loan and return records, and the evidence required to establish the investor’s position.

The broader lesson is that a favourable court ruling does not automatically produce a recoverable asset. The claim becomes real only if the institution can retrieve the relevant documentation, reconstruct the transaction history and satisfy the substantive requirements of the Danish regime.

Switzerland Proves the Cost of Gaps

Switzerland remains structurally demanding for non-resident portfolio investors. The Swiss anticipatory tax is levied at 35 per cent. There is generally no portfolio relief at source, so eligible non-resident investors must seek recovery through a post-payment refund claim, subject to the relevant double-taxation agreement and the applicable procedural requirements. Claims must generally be made within three years after the end of the calendar year in which the taxable benefit became due. The Swiss Federal Tax Administration’s refund guidance sets out the refund route and associated requirements.

The practical challenge is often evidential. For funds holding Swiss equities through nominees, omnibus accounts or pooled structures, a refund claim may depend on information passing through several intermediaries. The investor must be able to demonstrate treaty residence, beneficial ownership and entitlement to the dividend in the manner required by the applicable treaty and Swiss refund procedure.

Where shares have been lent, the importance of complete documentation increases. A reviewing authority may need to understand not only the position held at the dividend date but also whether lending, borrowing, collateral or related arrangements affected economic entitlement. A gap in the custody chain can transform a theoretically recoverable amount into prolonged delay, a reduced recovery or permanent leakage.

Switzerland provides a useful counterpoint to the prospective reporting architecture developing in Germany and the future simplification envisaged by FASTER. The withholding-tax rate may be known, the applicable treaty position may be clear and the investor’s policy intent may be uncontroversial. Yet recovery remains contingent on the ability to assemble a complete and credible evidential record.

FASTER Will Not Remove Today’s Problem

The EU’s FASTER Directive, Council Directive (EU) 2025/50 of 10 December 2024, is intended to reduce the friction of cross-border withholding-tax relief. Member States must transpose its provisions by 31 December 2028 and apply them from 1 January 2030. The Directive introduces a common digital tax residence certificate, relief-at-source and quick-refund procedures, together with a framework for certified financial intermediaries. The official text of Council Directive (EU) 2025/50 contains the binding rules.

FASTER simplifies the process without harmonising every substantive entitlement concept. Where the source Member State requires it, Article 12 requires a certified financial intermediary seeking relief to obtain a declaration from the registered owner that it is the beneficial owner of the dividend or interest in accordance with that state’s domestic rules or the applicable double-tax treaty. The same declaration must state whether the registered owner has engaged in a financial arrangement linked to the underlying publicly traded share that remains outstanding at the ex-dividend date. Under Article 11, Member States may also exclude, completely or partially, requests under the Directive’s relief-at-source or quick-refund systems where the dividend is linked to such an unresolved financial arrangement, or where the shares were acquired within five days before the ex-dividend date. These safeguards reinforce, rather than displace, the need to understand ownership, economic exposure and dividend-date arrangements. See Articles 11 and 12 of Council Directive (EU) 2025/50.

FASTER’s potential value is substantial, but it does not resolve the immediate national challenges identified above.

Switzerland sits outside the Directive. Germany’s MiKaDiv regime will operate before FASTER’s application date, Denmark’s reopening exercise requires institutions to revisit historic positions now, and Sweden’s exemption already creates contractual and operational questions for qualifying investors and their lending programmes. The interim landscape is therefore likely to remain fragmented.

From Governance to Implementation

WTS Hansuke’s work with institutional investors and financial intermediaries has included mapping withholding-tax exposure by jurisdiction, investor vehicle, custody model and lending programme, comparing expected and realised post-tax outcomes, and tracing the evidence needed to support entitlement through the custody chain. In practice, this has required tax entitlement, transaction records, contractual terms and operating responsibilities to be examined together rather than through separate tax, custody or securities-finance workstreams.

That work frequently brings securities-lending documentation into scope, particularly where changes in tax treatment may affect manufactured payments, indemnities, gross-up provisions, recalls or the allocation of risk between lender and borrower. It also requires organisations to test whether beneficial ownership, treaty residence and dividend entitlement can be evidenced consistently across the custody chain.

Operationally, the relevant information needs to be traceable, reconcilable and capable of being produced within the deadlines and formats imposed by tax authorities and intermediaries. For institutions with Danish exposure, that can mean reconstructing historic claims and determining whether supporting records remain available. For Swiss securities, it can mean testing whether reclaim processes are actively managed, monitored and escalated where necessary.

The same discipline underpins MiKaDiv and FASTER readiness. This work increasingly brings tax, investment, legal, operations, technology and securities-finance teams together to define responsibility, reconcile data and identify entitlement issues before a dividend event or reclaim deadline crystallises.

From Entitlement to Realised Return

The common lesson from Sweden, Germany, Denmark and Switzerland is that legal entitlement is only the starting point. Its economic value depends on whether contracts, ownership records, custody data and operating processes can give it practical effect.

For senior decision makers, withholding tax should therefore be viewed as part of investment governance, rather than solely as a reclaim process. The relevant question is whether the institution can demonstrate its entitlement and convert it into realised post-tax return.

Good withholding-tax outcomes are not secured by legislative entitlement alone. They depend on the institutional capability to make that entitlement real.

Research current to 10 September 2026.

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About the Authors

Ali Kazimi is Managing Partner of WTS Hansuke. Former Head of Tax at BlackRock, where he was responsible for the tax architecture of indexed strategies, ETFs and securities-lending platforms, and former Deloitte Partner, he advises financial institutions and institutional investors on the interaction between tax, regulation, investment governance and operating models. In July 2026, he was recognised as a Tax Legend at the Global Withholding Tax Summit in London.

Andy Smith is an Advisor in WTS Hansuke’s Capital Markets Advisory practice. His career includes senior positions at Northern Trust and roles at JPMorgan, Citi and NatWest Markets across securities lending, tax, due diligence and control oversight. He advises on securities-lending, financing, collateral and operating models. Read more about his recent appointment here.