Sometimes, however, investors fail to submit their paperwork on time. Also, not all foreign markets offer relief at source.

In these instances, investors can file an application to secure the treaty rate after the dividend is paid. In these post-payable reclaim regimes, investors submit claims to recover the difference between the unfavorable statutory rate and the favorable treaty rate.

In the above example, the investor would be taxed at the 35% rate when the dividend is paid. If they are eligible for the 15% treaty rate, they can submit a reclaim application to the tax authority and get a refund of 20% of the withheld tax, or $20. A visualization of the difference between relief at source and long form reclaim can be found here.

As long as a shareholder falls within the Statute of Limitations–the time limit for submitting reclaim applications–he or she is eligible to recover taxes. Unfortunately, receiving this refund payment takes time; it can take between 6 months and 5 years for foreign tax authorities to process reclaims.