Tax - ISDA Provision

2002 ISDA Master Agreement A Jolly Contrarian owner’s manual™ Resources and navigation [[{{{1}}} - 1992 ISDA Provision|This provision in the 1992]] Resources Wikitext | Nutshell wikitext | 1992 ISDA wikitext | 2002 vs 1992 Showdown | 2006 ISDA Definitions | 2008 ISDA | JC’s ISDA code project Navigation Preamble | 1 • (a) (b) (c) | 2 • (a) (b) (c) (d) | 3 • (a) (b) (c) (d) (e) (f) (g) | 4 • (a) (b) (c) (d) (e) | 5 • 5(a) Events of Default: 5(a)(i) Failure to Pay or Deliver 5(a)(ii) Breach of Agreement 5(a)(iii) Credit Support Default 5(a)(iv) Misrepresentation 5(a)(v) Default Under Specified Transaction 5(a)(vi) Cross Default 5(a)(vii) Bankruptcy 5(a)(viii) Merger Without Assumption 5(b) Termination Events: 5(b)(i) Illegality 5(b)(ii) Force Majeure Event 5(b)(iii) Tax Event 5(b)(iv) Tax Event Upon Merger 5(b)(v) Credit Event Upon Merger 5(b)(vi) Additional Termination Event (c) (d) (e) | 6 • (a) (b) (c) (d) (e) (f) | 7 | 8 • (a) (b) (c) (d) | 9 • (a) (b) (c) (d) (e) (f) (g) (h) | 10 | 11 | 12 • (a) (b) | 13 • (a) (b) (c) (d) | 14 | Index: Click ᐅ to expand: 2002 ISDA 1992 ISDA Section Tax in a Nutshell™ Use at your own risk, campers! “Tax” means any tax of any kind (including interest or penalties added to it) imposed by a taxing authority on any payment under this Agreement other than a Stamp Tax. view template Full text of Section Tax “Tax” means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. view template Related agreements and comparisons Click here for the text of Section Tax in the 1992 ISDA They’re the same! No comparison necessary! Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Content and 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)

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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. “{{{{ {{{2}}}prov}} |Tax}}” features in the ISDA Master Agreement as follows:

• Section {{{{ {{{2}}}prov}} |4(a)}}: To furnish specified information, including as regards (at {{{{ {{{2}}}prov}} |4(a)(iii)}}) any forms required to pay {{{{ {{{2}}}prov}} |Tax}} without withholding, leading on to...
• Section {{{{ {{{2}}}prov}} |2(d)}}: All payments are made without withholding or deduction unless required by law, and (where withholding IS required by law and the {{{{ {{{2}}}prov}} |Tax}} is an {{{{ {{{2}}}prov}} |Indemnifiable Tax}}) a gross-up is required.
• Section {{{{ {{{2}}}prov}} |4(e)}}: Each party pays its own {{{{ {{{2}}}prov}} |Stamp Tax}} on execution of the {{{{ {{{2}}}prov}} |Agreement}} (and indemnifies the other party if its taxing jurisdiction imposes about a stampable amount on the other party)

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Summary

{{{{{1}}}|Tax}} and {{{{{1}}} |Stamp Tax}} are meant to be mutually exclusive and both refer to duties levied on payments under the swap {{{{{1}}} |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 {{{{{1}}} |Tax}} and {{{{{1}}} |Stamp Tax}}, in a footnote on page 58.

“{{{{{1}}} |Tax}}” is defined in Section {{{{{1}}} |14}} as any tax, charge or other similar listed items, except a stamp, registration, documentation or similar tax (i.e., a “{{{{{1}}} |Stamp Tax}}” as defined in Section {{{{{1}}} |14}} of the 2002 Agreement).

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General discussion

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See also

• Tax - GMSLA Provision

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