(L-R): Thomas Rappold, CEO and Founder; Julian Nalenz, CTO and Co-Founder; Yves Elomo, Co-Managing Director, Luxembourg Branch of Divizend; Credit: Divizend

Chronicle.lu recently had the opportunity to speak with Yves Elomo, co-managing director of the Luxembourg branch of Divizend, which specialises in automation of  refundable foreign withholding tax claims, and aims to minimise time and cost for customers.

Chronicle.lu: What is your company's business area / main focus?

Yves Elomo: Divizend is the leading international Wealth tax FinTech platform with the fastest way to reclaim foreign withholding taxes on dividends. Within the trillion-dollar business of the dividends market, our B2B2C software helps private individuals or companies with listed equity investments abroad, institutional investors such as banks, stock exchanges, insurance companies, asset managers, family offices and financial service providers to reclaim their taxes by automating the withholding tax reclaim process. Divizend is the first FinTech in the world working to digitise such a novel service in a particularly user-friendly and affordable way.

Chronicle.lu: How did this opportunity present itself? Is it (partly) due to the changing regulatory landscape?

Yves Elomo: Not really, but current regulatory changes are moving in the right direction with the EU Capital Market Union or continuous digitisation efforts surrounding withholding taxes. After all, every time an investor receives a dividend on a cross-border basis, they are taxed twice: withholding tax + income tax.
We think that the best startup ideas arise from realising which pains we face ourselves: As all our team members own foreign stocks, we were frustrated about the process of filing withholding tax refund claims due to many technical, legal and tax-related hurdles. Consequently, just like many other investors, we were losing out on a significant portion of our dividend return rate, simply due to un-reclaimed withholding tax. Now, we have brought together the prerequisites for building a platform for that, namely our thorough experience with banking APIs, international taxation, securities, software development and with our CEO being a co-founder of Numbrs. After all, the reclaim market is massive, with a volume of $100 billion and growing steadily by 10% every year.

Chronicle.lu: What makes your company / product / service special or unique?

Yves Elomo: Our main competitors are consultancies like GlobeTax, Goal Group and Halvotec, which all target high net worth individuals (HNWIs) or financial institutions, are not fully self-service and have high fees. This means that they are legacy providers, which do not operate in an agile way. In contrast to them, we are cloud-based, API-first, benefit from our lean, microservices-based architecture and are able to easily connect to the existing tech and finance management infrastructure of SMEs. It is also noteworthy that tax consultancy firms and the Big Four might seem like a competitor at first, but they are actually a highly interesting partner for us. This is because such companies normally have only limited software development knowledge, but strong expertise in taxing and possibly international withholding tax refund processes. Together with them, we can offer their international customers our convenient and uniquely cost-effective solution, resulting in them being able to quickly address new markets on a large scale. In general, such a challenge is very difficult for other FinTechs to approach, as decade-long experience in many different areas needs to be brought together, most importantly securities, international taxing, APIs, software development and connections to the financial industry. For this and to be able to get started with PoCs with relevant players, high financial investment is required. Divizend has achieved all of this, leading to an industry-leading standing with enormous potential to grow.

Chronicle.lu: Please describe your company's business model (how do you generate income?).

Yves Elomo: We are using a revenue model based on transaction fees, comparable to credit card or payment processing companies. Generally, we charge 17.5% of the reclaimed tax amount as fees, which, considering most private investors have a rather small dividend income, results in a compelling win-win situation for both parties. Such low prices for our customers and high margins for Divizend and our partners are only possible because our service is fully digital and automated; for us, every single customer counts, not only those with large portfolios. Having integrated a customer into our ecosystem, the value of their assets will increase, leading to long-term growth on both sides. In addition to the reclaim service, we will have further revenue streams:
• We will offer a premium edition of our dividend screener with additional data, filters and analytics. The screener can also be plugged into financial portals or bank or brokerage websites; with some of our partners mentioned above, we are already in negotiations regarding this.
• As Divizend co-founder Thomas Rappold is a leading conception of highly successful financial indices and structured financial products, Divizend has already begun developing dividend growth fund certificates and other investment products for the Divizend users. The dividend screener will receive additional options for financial configuration, comparable to a robo advisor for investments focusing on dividends.
• In a mid-term perspective, we are also planning to establish subscription-based plans for the different dividend, tax and analytics services we offer. This will be especially interesting for customers as soon as we publicly offer a broader product spectrum.
• Banks, discount brokers and other financial institutions are highly interested in Divizend for their in-house usage, therefore we have developed a B2B SaaS solution and recently brought it to the market. As more and more banks try to downsize their cost-income-ratios and international tax authorities, e.g. Switzerland, Austria, Finland or Spain, are moving to an API-based filing method for reclaiming taxes, demand for Divizend's B2B solution will keep growing.

Chronicle.lu: During this quiet holiday period, what are you focusing on? Are you financing the startup yourselves, or have you attracted/are you trying to attract investors?

Yves Elomo: During this holiday season, we have been heavily focusing on research as well as approaching new large challenges in the further development of our platform. The research specifically also includes delving deeply into new markets on the sales and business development side, i.e. analysing other countries' landscape of taxes, tax advisors, banks, respective organisations etc., in order to kickstart our international expansion in the next few months. At the same time, we are working on continuously expanding our software development capabilities and planning and executing new, larger projects that will greatly expand our existing platform in the coming months. Regarding funding, we are currently fully bootstrapped and self-financed, with a solid financial base and six-digit funding from the co-founders. The next step for us will be a funding round of $5 - 10 million.

Chronicle.lu: In what way(s) do you think Luxembourg is the right place to fulfil your business goals?

Yves Elomo: Luxembourg is one of the world's leading asset management hubs and forms the world's third-largest market for withholding tax reclaims, after the US and the UK. Currently, at least $1 billion of withholding taxes stay un-reclaimed in Luxembourg every year! The country brings together not only banks, asset managers, family offices, etc., but also the expert tax knowledge of tax advisory firms and the Big Four. Further tailwinds come from Luxembourg's progressive and innovative Open Banking and API regulations as well as Luxembourg's outstanding support for FinTech startups, which we especially experienced after having won Fit 4 Start and CATAPULT: Kickstarter in 2021 and consequently incorporating our Luxembourg subsidiary company at the beginning of this year. And even geographically, Luxembourg is at the heart of Europe, with three other countries reachable with just a 30 minutes car trip.