Template:M summ GMSLA 12

Gross up (12.2(d))

Expect some ninja swordplay in the Schedule on the extent of the gross up in 12.2(d), especially if your counterparty has any particular warm feelings towards America. You may see all sorts of special pleadings about US Federal incomes taxes, hat-doffing to the sainted Internal Revenue Code of 1986, provisions exempting gross ups as a result of Section 871(m) and all that good stuff.

Another favourite trick is to try to harmonise with the Indemnifiable Taxes regime of the ISDA Master Agreement, by carving out a gross up obligation to the extent it is a function of the gross-up recipient’s tax status with the withholding jurisdiction:

“such Tax would not have been imposed but for a present or former connection between the jurisdiction imposing such Tax and the Recipient (other than the mere receipt of payment from Payer or the performance of Recipient’s obligations hereunder)”

You might think this a little tiresome. I couldn’t possibly comment.

Sales Tax (12.6)

Sales Tax is defined in Paragraph 2.1 as:

Sales Tax means value added tax and any other Tax of a similar nature (including, without limitation, any sales tax of any relevant jurisdiction);

For this bear of little brain this is a little ambiguous. Does this mean the Party who suffers the Sales Tax must pay it to the taxing authority upon receipt of an invoice, or does it mean the person who doesn’t suffer the Sales Tax must gross the other Party up?