Liability (for withholding) - ISDA Provision: Difference between revisions

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 comes from our old friend, the tiresome [[FT book about derivatives]], who think it addresses the time where a Payer makes a payment gross, relying in [[good faith]] on a {{isdaprov|Payee Tax Representation}} that the {{isdaprov|Payee}} is entitled to receive gross, only to then find that the tax authority in question requires the {{isdaprov|Payer}} to make that payment net after all.  In this case the Payer can require the Payee to indemnify it for the payment, interest and penalties.

This seems a stretch — the usually fulsome prose of the {{isdama}} neglects in this case to say anything about Payee Tax Representations, right or wrong, much less the Payer’s legitimate reliance on them. But on the other hand it is hard to think of a better explanation. So, go Paul C. Harding!!!