Liability (for withholding) - ISDA Provision: Difference between revisions
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This seems a stretch (though probably one they cribbed from [[2002 ISDA User Guide]]<ref>the [[2002 ISDA User Guide]] says “... no [[gross-up]] is required if the payee has made a {{isdaprov|Payee Tax Representation}} that was false when made or later becomes false (unless it becomes false as a result of a {{isdaprov|Change in Tax Law}} or similar legal development”</ref>) — the usually fulsome<ref>Did I say fulsome? Tiresome.</ref> prose of the {{isdama}} neglects in this case to say anything about {{isdaprov|Payee Tax Representations}}, right or wrong, much less the {{isdaprov|Payer}}’s legitimate reliance on them. It seems to say if the [[Payer]], whether through blameless inadvertence or stupidity, neglects to account for a tax it was obliged to account for, the poor old Payee has to cover. | This seems a stretch (though probably one they cribbed from [[2002 ISDA User Guide]]<ref>the [[2002 ISDA User Guide]] says “... no [[gross-up]] is required if the payee has made a {{isdaprov|Payee Tax Representation}} that was false when made or later becomes false (unless it becomes false as a result of a {{isdaprov|Change in Tax Law}} or similar legal development”</ref>) — the usually fulsome<ref>Did I say fulsome? Tiresome.</ref> prose of the {{isdama}} neglects in this case to say anything about {{isdaprov|Payee Tax Representations}}, right or wrong, much less the {{isdaprov|Payer}}’s legitimate reliance on them. It seems to say if the [[Payer]], whether through blameless inadvertence or stupidity, neglects to account for a tax it was obliged to account for, the poor old Payee has to cover. | ||
But on the other hand, it is hard to think of a better explanation. So, go [[FT book about derivatives|Paul C. Harding]]!!! | But on the other hand, it is hard to think of a better explanation than the one nicked from the [[2002 ISDA User Guide]]. So, go [[FT book about derivatives|Paul C. Harding]]!!! | ||
{{sa}} | {{sa}} | ||
*[[Withholding tax]] | *[[Withholding tax]] | ||
Revision as of 15:17, 19 September 2019
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ISDA Anatomy™
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It is hard to peer into the fevered mind of an ISDA ninja who came up with this provision to work out just what it is meant to do, and why.
The best guess we’ve seen comes from our old friend, the tiresome FT book about derivatives, whose learned author contends that it addresses the time where a Payer makes a payment gross, relying in good faith on a Payee Tax Representation that the Payee is entitled to receive gross, only to then find that the Taxing authority in question requires the Payer to make that payment net, and account to it for the Tax, after all. In this case the Payer can require the Payee to indemnify it for the payment, interest and penalties.
This seems a stretch (though probably one they cribbed from 2002 ISDA User Guide[1]) — the usually fulsome[2] prose of the ISDA Master Agreement neglects in this case to say anything about Payee Tax Representations, right or wrong, much less the Payer’s legitimate reliance on them. It seems to say if the Payer, whether through blameless inadvertence or stupidity, neglects to account for a tax it was obliged to account for, the poor old Payee has to cover.
But on the other hand, it is hard to think of a better explanation than the one nicked from the 2002 ISDA User Guide. So, go Paul C. Harding!!!
See also
References
- ↑ the 2002 ISDA User Guide says “... no gross-up is required if the payee has made a Payee Tax Representation that was false when made or later becomes false (unless it becomes false as a result of a Change in Tax Law or similar legal development”
- ↑ Did I say fulsome? Tiresome.