One-sided contract term of the day (3): grossing-up of withholding tax

Tax can be interesting! This golden oldie tackles a perennial commercial and drafting issue in licence agreements – who takes the risk of witholding tax?

IP Draughts

We continue our series highlighting IP Draughts’ “favourite” one-sided provisions in contracts.  These provisions are often found in contracts where there is an imbalance of power between the parties, and where the party with the power (let us call him the “Patron”) seeks to reduce a sometimes theoretical risk by imposing it on the other party (the “Supplicant”).

Today’s one-sided term is:

If any withholding tax is levied on the Payments, then Supplicant shall increase the sums paid to Patron so that the amount received by Patron after the withholding tax is deducted is the full amount Patron would have received if no withholding or deduction had been made.

This term differs from some of the others in the series in a number of ways.  First, it is focussed on an IP issue, or rather an IP tax issue – withholding tax.  Some of the other terms in the series…

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