Lease Agreement Withholding Tax

In addition to interest, fees and bonuses, there are a large number of other financing costs that can be significantly added to the overall financing costs. Withholding tax can have a significant impact on the cost of funds. In many legal systems, taxes from interest payments to non-domiciled lenders are withheld. In international credit markets, it is customary for borrowers to pay interest, so the net amount collected by lenders after the payment of withholding tax is the same as if there had been no withholding tax. The borrower therefore absorbs taxes and thus increases the cost of credit. In addition to withholding tax, some institutions may be subject to regulatory costs that are normally passed on to the borrower in accordance with the specific terms of the loan contracts.8 Borrowers will generally retain the ability to prepay the amounts due to each institution subject to withholding tax or additional regulatory costs. In addition, lenders are generally required to mitigate the effects of these additional costs where possible (for example. B by changes to the location of the booking office for a loan, etc.). The project company may be required to deduct local taxes on interest paid to lenders outside the country. In this case, banks generally require the project company to “gross increase” its interest payments (d. h.

increase it by sufficient amount to obtain the amount of the net interest payment to the bank after tax deduction, so that. B the interest payment of 100% and the withholding tax amounting to 100%, the project company must increase the interest payment to 111, then deduct 11 as a 10% withholding tax, i.e. pay 100% net to the bank). On the other hand, if the tenant accepts the cash base of the accounting, prepaid rents are deductible at the time of payment, provided that the prepaid rents do not exceed 12 months. Otherwise, prepaid/prepaid rentals beyond 12 months will be recorded as assets and claiming at the time of the lease as a deductible property. For withholding tax, all pre-rents and rents, including rents for the 12-month period, are subject to 5% of EWT at the time of payment. Some of the uncertainties of the executive are now clear. For example, the executive order has indicated different tax rates depending on the date of the underlying lease.