Payer Tax Representation - 1992 ISDA Provision

1992 ISDA Master Agreement
A Jolly Contrarian owner’s manual™

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Index: Click ᐅ to expand: 2002 ISDA 1992 ISDA

Section 3(e) in a Nutshell™

Use at your own risk, campers!

3(e) Payer Tax Representation. Each of its Payer Tax Representations specified in the Schedule is true. view template

Full text of Section 3(e)

3(e) Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. view template

Related agreements and comparisons

Related Agreements Click here* for the text of Section 3(e) in the 2002 ISDA* Comparisons Click to compare* this section in the 1992 ISDA and 2002 ISDA*.

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Content and comparisons

No change between Section 3(e) of the 1992 ISDA and Section 3(e) of the 2002 ISDA. To be fair, what’s there to change?

You’ll find the usual form of the Payer Tax Representations by clicking on that blue link. They live in Part 2 of the Schedule.

TL;DR: The basic rationale is this:

if the tax relates to the underlying instrument, rather than the Payer’s residence or tax status, the Payer does not have to gross up.
if the tax relates to the Payer’s residence or tax status, then the Payer does have to gross up unless the Payee should have provided information to the Payer which would have entitled the Payer to avoid the tax.
if you’ve agreed the FATCA Amendment, the Payer doesn’t have to gross up any FATCA Withholding Taxes.

The combination of the Payer Tax Representations and the Gross-Up clause of the ISDA Master Agreement has the following effect:

Section 3(e): I promise you that I do not have to withhold on my payments to you (as long as all your Payee Tax Representations are correct and you have, under Section 4(a), given me everything I need to pay free of withholding);
Section 2(d): I will not withhold on any payments to you. Unless I am required to by law. Which I kind of told you I wasn’t... If I have to withhold, I'll pay the tax the authorities and give you the receipt. If I only had to withhold because of my connection to the taxing jurisdiction (that is, if the withholding is an Indemnifiable Tax), I’ll gross you up. (You should look at the drafting of Indemnifiable Tax, by the way. It's quite a marvel). ...
Gross-Up: Unless the tax could have been avoided if the Payee had taken made all its 3(f) representations, delivered all its 4(a) material, or had its 3(f) representations been, like, true).
Stamp Tax is a whole other thing.
As is FATCA, which (as long as you’ve made your FATCA Amendment or signed up to a FATCA Protocol, provides that FATCA Withholding Taxes are excluded from the Section 3(e) Payer Tax Representations, and also from the definition of Indemnifiable Tax. Meaning one doesn't have to rep, or gross up, FATCA payments.