CPI companies

1
Schoenherr Matei Florea
2
Gross-up Provisions

• If the Borrower is required by law to make any
  deduction with respect to any amounts due under
  this Agreement, the Borrower shall increase the
  sum payable to the Lender to ensure that the
  Lender receives a net sum equal to the sum which
  it would have received had no such deduction been
  made by the Borrower.

3
Gross-up Provisions

• Withholding Tax on Interest Payments (Example)
• Romanian Fiscal Code
• Withholding Tax Rate 16
• Due Amount 100
• Grossed-up 119
• Double Taxation Treaty
• Withholding Tax Rate 3
• Due Amount 100
• Grossed-up 103

4
Gross-up Provisions

• Romanian Fiscal Code
• If the recipient of an interest payment effected
  by a Romanian tax resident is resident for
  taxation purposes in a jurisdiction with which
  Romania has concluded a treaty for the avoidance
  of double taxation (a "DTT"), the rate of
  Romanian withholding tax on interest payments to
  such recipient shall be limited to the tax rate
  stipulated in the respective DTT provided that
• (i) the tax rate set out in the DTT is more
  favourable than the withholding tax rate set out
  under Romanian domestic law and
• (ii) the recipient of the interest payments
  delivers to the Romanian income payer a
  certificate of fiscal residency.

5
Gross-up Provisions

• Methodological Norms
• The income received by non-residents from
  Romania will be taxed pursuant to the Romanian
  Fiscal Code, if
• (i) the recipient of income from Romania is
  resident in a jurisdiction with which Romania
  does not have a DTT, or
• (ii) the recipient of the income from Romania,
  which is resident in a jurisdiction with which
  Romania has a DTT does not submit a certificate
  of fiscal residency required under the Romanian
  Fiscal Code, or
• (iii) the tax owed by the non-resident is borne
  by the income payer.

6
Gross-up Provisions

• Latest Case Law Developments
• Decision no. 4111 of 22 November 2006 by the High
  Court of Cassation and Justice Double Taxation
  Treaty does not apply if a gross-up provision is
  set out in the agreement.