Duty Provisions in the Multicurrency Cross Border ISDA Master Agreement and Schedule

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ISDA Master Agreement and Schedule Tax procurements: what are they for?. Build up premise for presuming that no withholding is required RepresentationsTax structures Allocate danger of withholding assessment Allow pure troubled gathering to end. ISDA Master Agreement and Schedule Tax procurements: how would they work? (1) .

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Assess Provisions in the Multicurrency–Cross Border ISDA Master Agreement and Schedule Ruth Ainslie Senior Policy Director ISDA Fundamentals of ISDA Documentation Sao Paulo, Brazil August 6, 2002

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ISDA Master Agreement and Schedule Tax arrangements: what are they for? Set up reason for presuming that no withholding is required Representations Tax shapes Allocate danger of withholding expense Allow pure troubled gathering to end

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ISDA Master Agreement and Schedule Tax arrangements: how would they work? (1) Payer makes Payer Tax Representation that it is not required to withhold - Section 3(e) and Schedule Part 2(a) In making Payer Tax Representation, Payer may depend on Payee Tax Representations, Payee's consistence with Tax Agreement and arrangement of tax documents

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ISDA Master Agreement and Schedule Tax arrangements: how would they work? (1) (contd.) Payee commitments and portrayals are intended to guarantee conditions are met so that no withholding is required Payee makes Payee Tax Representations - Section 3(f) and Schedule Part 2(b) Tax Agreement : Payee consents to advise Payer if Payee Tax Representations stop to be genuine - Section 4(d) Payee consents to give tax documents - Section 4(a)(i)&(iii) and Schedule Part 3(a)

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ISDA Master Agreement and Schedule Tax arrangements: how would they work? (2) Payer goes out on a limb of withholding under Indemnifiable Tax ... Payer is required to net up for any withholding emerging under an Indemnifiable Tax - Section 2(d)(i)(4) Section 14 "Indemnifiable Tax" = any duty other than Stamp Tax forced because of an association amongst Payee and exhausting expert's purview

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ISDA Master Agreement and Schedule Tax arrangements: how would they work? (2) (contd.) … unless Payee is to blame… Payer is not required to net up if Payee breaks Tax Agreement or does not give tax documents - Section 2(d)(i)(4)(A) Payer is not required to net up if Payee Tax Representations stop to be genuine - Section 2(d)(i)(4)(B) … however Change of Tax Law chance stays with Payer must gross up regardless of the possibility that Change of Tax Law causes Payee Tax Representations to be false – Section 2(d)(i)(4)(B)

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ISDA Master Agreement and Schedule Tax arrangements: how would they work? (3) Tax Termination Events permit the troubled party to end the exchange Tax Event : if the commitment to withhold is brought on by a Change in Tax Law or comparable lawful improvement - Section 5(b)(ii) Tax Event Upon Merger : if the commitment to withhold is created by a gathering converging with another element - Section 5(b)(iii) BUT Payee may not end on the off chance that it is to blame

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Allocation of hazard under ISDA Master Agreement and Schedule Does commitment to withhold emerge under an Indemnifiable Tax? PAYEE RECEIVES NET Payee may end exchange if, for instance, commitment to withhold is brought on by a Change in Tax Law NO START YES Has Payee given tax documents and conformed to Tax Agreement? PAYEE RECEIVES NET Payee may not end exchange NO YES PAYER GROSSES UP Payer may end exchange if commitment to withhold is brought about by EITHER a Change in Tax Law or comparable legitimate improvement OR the merger of a gathering Are Payee Tax Representations genuine? Is this disappointment due just to a Change in Tax Law or comparable lawful advancement? NO YES

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ISDA Master Agreement and Schedule Tax-related provisions Master Agreement Section 2(d) - Withholding charge net up Section 3(e) - Payer Tax Representation Section 3(f) - Payee Tax Representations Section 4(a)(i) and (iii) - Tax frames Section 4(d) - Tax Agreement

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ISDA Master Agreement and Schedule Tax-related arrangements (contd.) Section 4(e) - Payment of Stamp Tax Section 5(b)(ii) - Tax Event Section 5(b)(iii) - Tax Event Upon Merger Section 14 - Definitions of "Indemnifiable Tax" and "Tax" Schedule Part 2 - Tax Representations Part 3 - Tax Forms

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New US Regulations (Effective 2001) No withholding on swaps (gave no inserted advance) No US tax document required to abstain from withholding But portrayals might be expected to keep away from data detailing

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Information giving an account of installments to remote parties Form 1042S revealing for swap installments to US branch of outside counterparty Foreign counterparty builds up that it is not carrying on of US branch by: Representing in a swap calendar or affirmation that it is a US individual or non-US branch of an outside individual; Providing Form W-8BEN to guarantee that it is a remote individual

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Domestic data giving an account of Form 1099 Does not matter if payee speaks to in swap timetable or affirmation that it is an outside individual or gives Form W-8BEN is an absolved beneficiary, (for example, an enterprise)

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Standard portrayals for US data reporting In October, 2001, ISDA issued standard portrayals for reasons for the US data announcing prerequisites simply depicted Available on ISDA site (www.isda.org)

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New ISDA Master Agreement Tax arrangements right now under survey by ISDA's Tax Committee Change to 5(b)(iv)(2) Some further changes under talk Incorporates October, 2001 US withholding portrayals See October clarification (and get impose counsel) for help choosing suitable portrayal

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