Template:Withholding under ISDA: Difference between revisions
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Amwelladmin (talk | contribs) Created page with "The combination of the Payer Tax Representations and the Gross-Up clause of the ISDA has the following effect: *'''Section {{isdaprov|3(e)}}''': I promise you that I do not ha..." |
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The combination of the Payer Tax Representations and the Gross-Up clause of the | ===Withholding under the ISDA=== | ||
*'''Section {{ | '''TL;DR''': The basic rationale is this: | ||
*'''Section {{ | *if the [[tax]] relates to the underlying instrument, rather than the {{{{{1}}}|Payer}}’s residence or tax status, the {{{{{1}}}|Payer}} does not have to [[gross up]]. | ||
*if the [[tax]] relates to the {{{{{1}}}|Payer}}’s residence or tax status, then the Payer does have to [[gross up]] ''unless the {{{{{1}}}|Payee}} should have provided information to the {{{{{1}}}|Payer}} which would have entitled the {{{{{1}}}|Payer}} to avoid the [[tax]]''. | |||
*if you’ve agreed the {{{{{1}}}|FATCA Amendment}}, the {{{{{1}}}|Payer}} doesn’t have to gross up any {{{{{1}}}|FATCA Withholding Tax}}es. | |||
The combination of the {{{{{1}}}|Payer Tax Representations}} and the {{{{{1}}}|Gross-Up}} clause of the {{isdama}} has the following effect: | |||
*'''Section {{{{{1}}}|3(e)}}''': I promise you that I do not have to withhold on my payments to you (as long as all your {{{{{1}}}|Payee Tax Representations}} are correct and you have, under Section {{{{{1}}}|4(a)}}, given me everything I need to pay free of withholding); | |||
*'''Section {{{{{1}}}|2(d)}}''': I will not withhold on any payments to you. Unless I am required to by law. Which I kind of told you I wasn’t... If I have to withhold, I'll pay the tax the authorities and give you the receipt. If I only had to withhold because of my connection to the taxing jurisdiction (that is, if the withholding is an {{{{{1}}}|Indemnifiable Tax}}), I’ll [[Never gonna gross you up|gross you up]]. (You should look at the drafting of {{{{{1}}}|Indemnifiable Tax}}, by the way. It's quite a marvel). ... | |||
*'''{{{{{1}}}|Gross-Up}}''': ''Unless'' the tax could have been avoided if the {{{{{1}}}|Payee}} had taken made all its {{{{{1}}}|3(f)}} representations, delivered all its {{{{{1}}}|4(a)}} material, or had its {{{{{1}}}|3(f)}} representations been, like, ''true''). | |||
*'''{{{{{1}}}|Stamp Tax}}''' is a whole other thing. | |||
*As is '''[[FATCA]]''', which (as long as you’ve made your {{{{{1}}}|FATCA Amendment}} or signed up to a {{{{{1}}}|FATCA Protocol}}, provides that {{{{{1}}}|FATCA Withholding Tax}}es are excluded from the Section {{{{{1}}}|3(e)}} {{{{{1}}}|Payer Tax Representations}}, and also from the definition of {{{{{1}}}|Indemnifiable Tax}}. Meaning one doesn't have to rep, or [[Gross-Up - ISDA Provision|gross up]], [[FATCA]] payments. |
Latest revision as of 13:30, 14 August 2024
Withholding under the ISDA
TL;DR: The basic rationale is this:
- if the tax relates to the underlying instrument, rather than the {{{{{1}}}|Payer}}’s residence or tax status, the {{{{{1}}}|Payer}} does not have to gross up.
- if the tax relates to the {{{{{1}}}|Payer}}’s residence or tax status, then the Payer does have to gross up unless the {{{{{1}}}|Payee}} should have provided information to the {{{{{1}}}|Payer}} which would have entitled the {{{{{1}}}|Payer}} to avoid the tax.
- if you’ve agreed the {{{{{1}}}|FATCA Amendment}}, the {{{{{1}}}|Payer}} doesn’t have to gross up any {{{{{1}}}|FATCA Withholding Tax}}es.
The combination of the {{{{{1}}}|Payer Tax Representations}} and the {{{{{1}}}|Gross-Up}} clause of the ISDA Master Agreement has the following effect:
- Section {{{{{1}}}|3(e)}}: I promise you that I do not have to withhold on my payments to you (as long as all your {{{{{1}}}|Payee Tax Representations}} are correct and you have, under Section {{{{{1}}}|4(a)}}, given me everything I need to pay free of withholding);
- Section {{{{{1}}}|2(d)}}: I will not withhold on any payments to you. Unless I am required to by law. Which I kind of told you I wasn’t... If I have to withhold, I'll pay the tax the authorities and give you the receipt. If I only had to withhold because of my connection to the taxing jurisdiction (that is, if the withholding is an {{{{{1}}}|Indemnifiable Tax}}), I’ll gross you up. (You should look at the drafting of {{{{{1}}}|Indemnifiable Tax}}, by the way. It's quite a marvel). ...
- {{{{{1}}}|Gross-Up}}: Unless the tax could have been avoided if the {{{{{1}}}|Payee}} had taken made all its {{{{{1}}}|3(f)}} representations, delivered all its {{{{{1}}}|4(a)}} material, or had its {{{{{1}}}|3(f)}} representations been, like, true).
- {{{{{1}}}|Stamp Tax}} is a whole other thing.
- As is FATCA, which (as long as you’ve made your {{{{{1}}}|FATCA Amendment}} or signed up to a {{{{{1}}}|FATCA Protocol}}, provides that {{{{{1}}}|FATCA Withholding Tax}}es are excluded from the Section {{{{{1}}}|3(e)}} {{{{{1}}}|Payer Tax Representations}}, and also from the definition of {{{{{1}}}|Indemnifiable Tax}}. Meaning one doesn't have to rep, or gross up, FATCA payments.