Withholding tax

ISDA Anatomy™ incorporating our exclusive ISDA in a Nutshell™ Go Premium In a Nutshell™ Section Indemnifiable Tax: An Indemnifiable Tax is any Tax that is not a Stamp Tax that is not a tax that would not be imposed if there were not a connection between the taxing authority’s jurisdiction and the recipient that did not arise solely from the recipient having performed any part of this Agreement in that jurisdiction. view template 2002 ISDA full text of Section Indemnifiable Tax: “Indemnifiable Tax” means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). view template Click here for the text of Section Indemnifiable Tax in the 1992 ISDA Index: Click ᐅ to expand: ISDA Navigation The Varieties of ISDA Experience Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext) Preamble Pre Pre Pre Interpretation 1 1 1 Obligns/Payment 2 2 2 Representations 3 3 3 Agreements 4 4 4 EODs & Term Events 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • FM • Tax Event • TEUM • CEUM • ATE • Early Termination 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off Transfer 7 7 7 Contractual Currency 8 8 8 Miscellaneous 9 9 9 Offices; Multibranch Parties 10 10 10 Expenses 11 11 11 Notices 12 12 12 Governing Law 13 13 13 Definitions 14 14 14 Schedule Schedule Schedule Schedule Termination Provisions Part 1 Part 1 Part 1 Tax Representations Part 2 Part 2 Part 2 Documents for Delivery Part 3 Part 3 Part 3 Miscellaneous Part 4 Part 4 Part 4 Other Provisions Part 5 Part 5 Part 5 Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

A form of tax in which the payer of an amount of money (often interest payment or a dividend) is must withhold a portion of that payment and remit it to the tax authorities on the payee's behalf.

Certain kinds of tax are susceptible to withholding: taxes on interest and dividend payments, for example, as these are neatly determinative and may be clipped a pre-specified rate without any pause for thought. Other taxes are less suitable for withholding: General income tax obligations, the net levels of which depend on one's whole income over a year, for example. These can’t realistically be claimed by withholding, but that won’t stop tax attorneys avoiding non-existent doubts about the risk that some revenue authority, somewhere in the world, contrives some way of doing it.

Gross up

Wherever one finds a withholding tax — or a risk of one — one will find legal provisions compelling the payer to gross up the withheld payment (or absolving it from doing so). A gross up is meant to put the payee in the position it would have been had there been no withholding, so it gets he whole amount it initially expected. Grossing up may mean having to withhold an additional extra bit from the grossed up payment (and having to gross up that too, in an asymptotic slivers ad nauseam)

ISDA Master Agreement

The ISDA Master Agreement has all sorts of provisions about withholding, gross up and what kinds of taxes count (Indemnifiable Taxes), which includes a fantastic quintuple negative.

See also

• gross-up
• Indemnifiable Tax