“For banks, particularly so called certified financial intermediaries (CFIs),” the EU’s Faster directive “will result in greater reporting and liability challenges,” noted Alexander Lerch, co-founder and CEO of Raquest, a fintech firm specialising in automated withholding tax management for financial institutions, in an interview.

Raquest, a subsidiary of the Halvotec Group with offices in Germany and Switzerland, has over 15 years of experience in simplifying and automating withholding tax processing, serving as a key link between financial institutions, tax authorities and industry associations across Europe.

Kangkan Halder: What inspired Raquest to join the Association of the Luxembourg Fund Industry this year? How does this move fit with your overall strategic goals?

Alexander Lerch: Raquest has consistently fostered close collaboration with industry associations to maintain strong connections within the financial sector. We consider it essential to actively participate, exchange knowledge and engage in discussions about the latest industry developments and solutions with experts of this sector. This collaborative approach enables us to develop our solutions in alignment with market needs and to fine-tuning them by incorporating our customers’ requirements into our product management.

In the context of Luxembourg’s fund industry, which holds a significant global market share--56%--in cross-border investment funds, withholding tax is a crucial topic. Alfi is an excellent platform for engaging in profound dialogues with market participants on such important matters and for entering an intensive dialog with involved parties. The high quality of Alfi’s events and the depth of their industry work were compelling factors in our decision to strive for membership. We are delighted to now be part of this distinguished network, which aligns perfectly with our commitment to industry collaboration and innovation.

What expertise does Raquest offer in withholding tax processing and the EU’s Faster initiative?

Raquest offers over 15 years of extensive expertise in the withholding tax landscape. Our eponymous software encompasses more than 35 investment markets and 15 domiciles, addressing all variants of withholding tax relief procedure.

The software meticulously incorporates all relevant regulations, forms, processes and special regulations for all types of investors, including natural persons, groups and institutional investors. Furthermore, it facilitates end-to-end processing and monitoring of the different tax procedures. Raquest also addresses regulatory issues, such as the new German procedure ‘MiKaDiv’, demonstrating our commitment to staying abreast of evolving financial regulations. With years of hands-on experience in withholding tax practices, we offer our clients not only an automated software tool but also comprehensive advisory services.

Since the first drafts of the Faster initiative, we have been deeply engaged with its development. We provide every financial institution with extensive guidance on optimally preparing for and implementing this significant regulatory change.

Faster [directive] will pose significant challenges for banks in meeting the new reporting requirements.

Alexander Lerch, co-founder and CEO, Raquest

How do you see the Faster directive impacting financial institutions, tax authorities and investors?

The European Commission and the European Council, representing national governments, are deeply focused on combating tax fraud. To prevent incidents such as the cum-ex scandal in the future, they are implementing more transparent and comprehensive reporting requirements along with extensive liability obligations for the financial industry. As a result, banks will need to pay closer attention to these topics.

For banks, particularly so-called certified financial intermediaries (CFIs), this will result in greater reporting and liability challenges. While the Faster directive aims to simplify withholding tax relief processes for investors, it may not necessarily reduce costs. The Faster directive will notably impact several areas in the financial sector. Firstly, it will influence a faster document issuance. Electronic tax residency certificates (eTRCs) will be issued within hours instead of weeks, significantly speeding up the application process. Changes will also occur in form of faster submission and application processes. The growing availability of digital filing options from tax authorities will eliminate the need for postal submissions, further accelerating the process. The overall tax relief process will be faster in the future due to the introduction of fast-track procedures. Fixed deadlines of 90 days for quick refund applications, tax reductions through relief at source, and the introduction of default interest for late payments will ensure that investors receive their money more promptly.

Some changes and overall greater digitisation will also affect the work of tax authorities. In fact, the provision of eTRCs and digital interfaces for data transmission is expected to accelerate processes even more, building up on recent developments of the initiative over the past years.

What challenges do you expect with the Faster directive, and how will Raquest address them?

Faster will pose significant challenges for banks (CFIs) in meeting the new reporting requirements. Key success factors for an effective implementation of Faster will include efficient data collection, segmentation, storage of relevant earnings and investor data, as well as the introduction of digital interfaces and streamlined process handling--areas where Raquest has consistently led the way and is one of the sector’s leading experts today.

It is crucial to adapt as early as possible to the new directive and collaborate with financial institutions to develop strategies and solutions to ensure to be fully prepared for the launch of Faster. As a leading withholding tax fintech, Raquest will fully support its customers and provide the optimal solution for this big transition.

We have been serving clients in Luxembourg for many years already, such as DZ Privatbank and Spuerkeess

Alexander Lerch, co-founder and CEO, Raquest

How crucial is automation in tax processing, and where does Raquest fit in?

The overall complexity and costs of processing withholding tax make automation one of the biggest

success factors, when offering this service. It reduces manual errors, enhances compliance by meeting investor reporting obligations and maximises earnings potential with minimal effort.

With tax authorities increasingly digitalising their processes--an acceleration driven by initiatives such as Faster--financial institutions must urgently adopt digital solutions. Raquest offers end-to-end automation, from data collection and processing to reporting and booking, supporting all three types of withholding tax relief: relief at source, quick refund and standard reclaim. For asset managers, the Raquest ForTC module enhances claim management by detecting discrepancies, transitioning open payments into the standard refund process and effectively managing vendor risks by supervising both claim bookings and settlement of claims.

Finally, what are Raquest’s expansion plans, particularly in Luxembourg?

Luxembourg has always been a key market for Raquest, especially in the asset management segment. Additionally, we have been serving [banking] clients in Luxembourg for many years already, such as DZ Privatbank and Spuerkeess. With our newest addition, the ForTC module within the Raquest software, developed specifically for asset managers, we see significant potential in Luxembourg and are planning to expand our presence in the coming years.