PricewaterhouseCoopers, the world’s largest professional services organization, has created an electronic communications system and central repository called Data Link for Intermediaries (DALI). This will be the backbone of the new solution for financial institutions to handle changes in tax regulations.
DALI will help financial institutions meet new reporting requirements by facilitating the interaction between US withholding agents and their non-US intermediary customers.
On January 1, 2001, new US tax regulations will take effect to eliminate abuses. Under a new procedure, qualified intermediaries may claim reduced rates or exemptions from taxes on behalf of their customers without disclosing their identities. In contrast, non-qualified intermediaries must disclose the owners and produce documentation in support of their claims. DALI will allow intermediaries to comply with the stricter regulation and help non-US investors realize the lower rate.
“This change in withholding of US taxes is a critical issue and will have a dramatic effect on the way institutions need to report taxes for non-US clients,” said Cyrus Daftary, a director in PricewaterhouseCoopers’ tax technology solutions practice. “DALI provides the means to be prepared for this transition, thus avoiding costly disruptions that could jeopardize customer relationships.”
The protocol, daliML, is based on eXtensible Markup Language, the emerging standard for data-sharing between applications. This specification is expected to set the standard within the withholding and reporting area of the financial services industry.
“We work with some of the leading global financial institutions and understand the impact a change of this magnitude will have on the business operations of this consortium,” said Benjamin Glicher, director, financial services consulting practice. “By combining this understanding with our e-business knowledge, we are in a unique position to develop this innovative solution.”
DALI, which uses tax-related business terminology:
*leverages the innovation and standardization work from the Internet community
*streamlines data transmission procedures
*creates a standardized set of data elements
*supports the globalization of financial operations, and the cross-border flow
*serves as a central document and data repository for tax documents and core account information between US financial institutions and foreign intermediaries as prescribed by the 1441 Tax Regulations
* allows the back-office operations area to take advantage of leading-edge interactive technology.
“Assisting in the development of DALI, we are pooling resources, sharing industry knowledge and determining standards that meet industry needs,” said Anthony DiMurro, vice president of international services at DTCC. “The alternative would be for each industry participant to develop its own solution to the new withholding tax laws which is not cost effective or efficient.”
The Depository Trust & Clearing Corporation is a holding company and provides services to two principal subsidiaries, The Depository Trust Company and National Securities Clearing Corporation. These two firms provide the primary infrastructure for the clearance, settlement and custody of the vast majority of all equity, corporate and municipal bond transactions in the United States.
PricewaterhouseCoopers is the world’s largest professional services organization.