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Liability (for withholding) - ISDA Provision: Difference between revisions
Liability (for withholding) - ISDA Provision (view source)
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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 {{isdaprov|Payer}} makes a payment gross, relying in [[good faith]] on a {{isdaprov|Payee Tax Representation}} that that turned out to be false, only to then find that the {{isdaprov|Tax}}ing authority in question requires the {{isdaprov|Payer}} to make that payment net, and account to it for the {{isdaprov|Tax}}, after all. In this case the {{isdaprov|Payer}} can require the {{isdaprov|Payee}} to [[indemnify]] it for the payment, interest and penalties. | 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 {{isdaprov|Payer}} makes a payment gross, relying in [[good faith]] on a {{isdaprov|Payee Tax Representation}} that that turned out to be false, only to then find that the {{isdaprov|Tax}}ing authority in question requires the {{isdaprov|Payer}} to make that payment net, and account to it for the {{isdaprov|Tax}}, after all. In this case the {{isdaprov|Payer}} can require the {{isdaprov|Payee}} to [[indemnify]] it for the payment, interest and penalties. | ||
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 or {{isdaprov|Change in Tax Law}}. | 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 or {{isdaprov|Change in Tax Law}} — all of that is in the previous section ({{isdaprov|2(d)(i)}}) about the liability to withhold and [[gross-up]] in the first place. | ||
It seems to say if the {{isdaprov|Payer}}, whether through blameless inadvertence, stupidity ''or'' the falsity of a {{isdaprov|Payee Tax Representation}}, neglects to account for a {{isdaprov|Tax}} it was obliged to account for, the poor old {{isdaprov|Payee}} has to cover. | It seems to say if the {{isdaprov|Payer}}, whether through blameless inadvertence, stupidity ''or'' the falsity of a {{isdaprov|Payee Tax Representation}}, neglects to account for a {{isdaprov|Tax}} it was obliged to account for, the poor old {{isdaprov|Payee}} has to cover. | ||