VAT Taxes. All amounts referred to in this agreement are exclusive of any value-added taxes ("VAT") properly chargeable on goods or services transferred under this agreement.
VAT applicability and treatment will be determined pursuant to the law of the jurisdiction where a transfer subject to VAT is deemed to take place.
On the Payment Due Date, the Buyer shall pay to the Seller Representative an amount equal to the VAT, if any, properly chargeable in the Seller Representative's jurisdiction for transfers under this agreement; provided, however, that (i) such amount need not be paid until the Seller Representative provides the Buyer with a valid VAT invoice in relation to that amount and, (ii) the Buyer is under no obligation to make any payment to the Seller Representative in respect of VAT which the Buyer must self-assess and pay under the “reverse charge” rule or any similar system in the Buyer's jurisdiction.
Each party shall, to the extent permitted by law, provide the other with any additional valid VAT invoices as required for the purposes of this agreement and, to the extent required by law, shall correctly account for any VAT properly due in its jurisdiction.
Subject to each party's obligations relating to VAT, each party shall cause all royalties, taxes, duties and other sums (including any stamp duty, other documentary taxes, climate change levy or other environmental tax or levy) legally payable by that party arising in connection with this agreement to be paid.
In the event that the Seller Representative is required by law to pay any tax which is properly for the account of the Buyer, the Buyer shall promptly indemnify or reimburse the Seller Representative in respect of such tax. In the event that the Buyer is required by law to pay any tax which is properly for the account of the Seller Representative, the Buyer may deduct the amount of any such tax from the sums due to the Seller Representative under this agreement and the Seller Representative shall promptly indemnify or reimburse the Buyer in respect of any such tax not so deducted.
This example provides that the buyer is responsible for paying VAT. If VAT is chargeable to the seller (or, in the example, the sellers' representative), then the buyer must pay the seller the value of the tax. Note that where a “Reverse Charge Rule” is part of the VAT law in the buyer’s country, the buyer is responsible for calculating and paying VAT directly to the foreign government entity that charges the tax.
In this example, taxes other than the VAT are allocated to the party to whom they are properly chargeable. This is a simple solution, though many will prefer to negotiate a different allocation of taxes and other costs.
Disclaimer: Materials on this site are meant to highlight issues that should be considered in PES transactions, not to provide a substitute for experienced legal counsel. It will be essential to engage legal counsel in conjunction with any PES transaction to ensure that any agreements reflect the latest developments in the field and comply with current local and national legislation.
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