Template:M summ 2002 ISDA 5(b)(iv): Difference between revisions

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A “{{isdaprov|Burdened Party}}” is different from an “{{isdaprov|Affected Party}}” because taxes may fall on one’s ''own income'' (in which case one is both “''burdened''”, since you are the one who has to stump up to the taxman, and “''affected''” since your own income is correspondingly reduced by the payment) or on one’s ''payment obligations to someone else'' (in which case one is “''burdened''” by the tax, but not “''affected''” by it, since it is your poor counterparty who winds up a bit short in the proverbial ring).
A “{{isdaprov|Burdened Party}}” is different from an “{{isdaprov|Affected Party}}” because the tax obligation — well, ''burden — resulting from the merger of one counterparty may fall on the ''other'' one. If I were Russian and you Cypriot, and I was able to pay without withholding thanks to the Russia-Cyprus double tax treaty, and you went and merged into a Scottish company, meaning you became Scottish, then suddenly I can’t take advantage of that marvellous double tax treaty any more. In that case I am the “{{isdaprov|Burdened Party}}” — the one suffering the tax burden — but you are the “{{isdaprov|Affected Party}}” — since it was your merger which triggered the unhappy tax transformation.
 
In the case where my merger also caused me to suffer the tax burden, I would be both the Burdened Party ''and'' the Affected Party.
 
This is you can imagine, a red letter day for {{icds}} w2ho quite outdid itself in the complicated permutations for how to terminate an {{isdama}} should there be a {{isdaprov|Tax Event}} or a {{isdaprov|Tax Event Upon Merger}}. Things kick off in Section {{isdaprov|6(b)(ii)}} and it really just gets better from there on in.<ref>It doesn’t.</ref>

Revision as of 18:15, 13 September 2022

A “Burdened Party” is different from an “Affected Party” because the tax obligation — well, burden — resulting from the merger of one counterparty may fall on the other one. If I were Russian and you Cypriot, and I was able to pay without withholding thanks to the Russia-Cyprus double tax treaty, and you went and merged into a Scottish company, meaning you became Scottish, then suddenly I can’t take advantage of that marvellous double tax treaty any more. In that case I am the “Burdened Party” — the one suffering the tax burden — but you are the “Affected Party” — since it was your merger which triggered the unhappy tax transformation.

In the case where my merger also caused me to suffer the tax burden, I would be both the Burdened Party and the Affected Party.

This is you can imagine, a red letter day for ISDA’s crack drafting squad™ w2ho quite outdid itself in the complicated permutations for how to terminate an ISDA Master Agreement should there be a Tax Event or a Tax Event Upon Merger. Things kick off in Section 6(b)(ii) and it really just gets better from there on in.[1]

  1. ↑ It doesn’t.
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