Gross-Up - ISDA Provision: Difference between revisions
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{{isdasnap|2(d)(i)}} | {{isdasnap|2(d)(i)}} | ||
====Commentary==== | ====Commentary==== | ||
{{nuts|ISDA|Gross Up}} | {{nuts|ISDA|Gross-Up}} | ||
In a {{nutshell}} Section {{isdaprov|2(d)}} does the following: | In a {{nutshell}} Section {{isdaprov|2(d)}} does the following: |
Revision as of 17:14, 11 April 2016
In gory detail
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Commentary
Gross-Up in a Nutshell™ (ISDA edition)
- 2(d)(i) Gross-Up. The parties must pay without withholding unless required by law. Where a payer has to withhold, it must:—
- (1) promptly tell the recipient;
- (2) promptly pay the withheld amount to the relevant authorities (including the withholding on any required gross-up);
- (3) give the recipient a receipt for the tax payment; and
- (4) gross up any Indemnifiable Tax, so that the recipient receives the amount it would otherwise have received (free of Indemnifiable Taxes). However, the payer need not gross up any withholding that arose only because:—
- (A) the recipient did not provide Section 4(a) tax information, or breached its Payee Tax Representations; or
- (B) the recipient's Payee Tax Representations were not true (other than because of regulatory action taken after execution of the Transaction or a Change in Tax Law.
In a Nutshell™ Section 2(d) does the following:
- Net obligation: if a counterparty suffers withholding it generally doesn’t have to gross up – it just remits tax to the revenue and pays net
- Refund obligation where tax subsequently levied: if a counterparty pays gross and subsequently is levied the tax, the recipient must refund an equivalent amount to the tax.
- Indemnifiable Tax: the one exception is “Indemnifiable Tax” - this is tax arises as a result of the payer’s own status vis-à-vis the withholding jurisdiction. In that case the payer has to gross up.