Tax - ISDA Provision: Difference between revisions
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Latest revision as of 16:26, 13 September 2024
2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™ Go premium
Crosscheck: Tax in a Nutshell™
Original text
See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA.
Resources and Navigation
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Comparisons
Redlines
- 1987 ⇒ 1992: Redline of the ’92 vs. the ’87: comparison (and in reverse)
- 1992 ⇒ 2002: Redline of the ’02 vs. the ’92: comparison (and in reverse)
- 1987 ⇒ 2002: Redline of the ’92 vs. the ’87: comparison (and in reverse)
Discussion
You will find the redlines above most disappointing — or delightful, depending on whether you like order or chaos — as this language has not changed at all since 1987. “Tax” features in the ISDA Master Agreement as follows:
- Section 4(a): To furnish specified information, including as regards (at 4(a)(iii)) any forms required to pay Tax without withholding, leading on to...
- Section 2(d): All payments are made without withholding or deduction unless required by law, and (where withholding IS required by law and the Tax is an Indemnifiable Tax) a gross-up is required.
- Section 4(e): Each party pays its own Stamp Tax on execution of the Agreement (and indemnifies the other party if its taxing jurisdiction imposes about a stampable amount on the other party)
Basics
Tax and Stamp Tax are meant to be mutually exclusive and both refer to duties levied on payments under the swap Transaction itself and not under hedges to it, so be careful when using them (especially in the context of delta-one synthetic equity swaps where the main stamp duty and capital gains issues accrue on Hedge Positions. For those you might want to introduce a conceopt like Local Taxes, or something similar.
Here’s what the ISDA Users’ guide has to say about Tax and Stamp Tax, in a footnote on page 58.
- “Tax” is defined in Section 14 as any tax, charge or other similar listed items, except a stamp, registration, documentation or similar tax (i.e., a “Stamp Tax” as defined in Section 14 of the 2002 Agreement).
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