TaxGrid is a global tax withholding solution that leverages blockchain technology to automate, decentralize and securely share tax and financial information while maintaining data privacy between financial institutions and government agencies.
What EY teams can do for you
Investors today — including individuals, corporations, investment funds and pension funds — often may pay more tax than is due on income received from cross-border investments. This is owing to overly complicated and inefficient processes in the application of international tax treaties.
To prove investors’ entitlement to tax treaty relief and ensure that they pay the appropriate amount of withholding tax, their information and documentation requires sharing through a complex network of intermediaries.
This is a cumbersome and generally paper-based process where information could be lost or not shared appropriately due to privacy concerns. It also may not be trusted by counterparties and tax authorities, who require more and more information to validate that the correct amount of withholding tax has been paid either by relief at source or after a withholding reclaim.
The European Commission estimated in 20161 that the overall cost to the European Union of this withholding tax is €8.4b annually.
TaxGrid helps to tackle the global tax withholding challenge by providing investors, intermediaries and tax authorities with a blockchain-enabled solution to exchange relevant investor and investment data.
TaxGrid’s mission is simple: to help taxpayers resolve the global tax withholding challenge helping investors to obtain withholding tax treaty relief at source, increase governments’ confidence in the investor’s tax treaty entitlement, and improve efficiency for financial intermediaries.
Multiparty network for data sharing and efficiency
TaxGrid is a multi-party blockchain network that connects financial intermediaries and governments to share tax and finance data and documentation. By helping to increase efficiency and achieve better net returns for investors, it creates a powerful network effect.
Automation via system integration
TaxGrid automatically interacts with intermediaries’ enterprise systems to extract the key information needed to identify investment ownership.
Privacy and confidentiality
Through Zero Knowledge Proof (ZKP) technology, investors’ information is kept private and confidentially shared on a requested basis - building trust among the parties involved.
Audits and verification
TaxGrid assists network participants to quickly review relevant information about a given investor (beneficial owner) in the event of an audit or even a reclaim validation.
Smart contract and tokenization
Through smart contracts, TaxGrid tokenizes investment entitlements and distributes them via blockchain across the various financial entities’ wallets. Once the final investors are identified, the tokens provide the investment information needed to calculate the appropriate withholding tax.