Tax - ISDA Provision
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2002 ISDA Master Agreement A Jolly Contrarian owner’s manual™
Tax in all its glory
Related agreements and comparisons
Resources and Navigation
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Overview
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)
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. “{{{{{1}}}|Tax}}” features in the ISDA Master Agreement as follows:
- Section {{{{{1}}}|4(a)}}: To furnish specified information, including as regards (at {{{{{1}}}|4(a)(iii)}}) any forms required to pay {{{{{1}}}|Tax}} without withholding, leading on to...
- Section {{{{{1}}}|2(d)}}: All payments are made without withholding or deduction unless required by law, and (where withholding IS required by law and the {{{{{1}}}|Tax}} is an {{{{{1}}}|Indemnifiable Tax}}) a gross-up is required.
- Section {{{{{1}}}|4(e)}}: Each party pays its own {{{{{1}}}|Stamp Tax}} on execution of the {{{{{1}}}|Agreement}} (and indemnifies the other party if its taxing jurisdiction imposes about a stampable amount on the other party)
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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- The JC’s famous Nutshell™ summary of this clause
- Ok, so why leave out Stamp Tax?