Bifalgorithm post · Une erreur comptable peut-elle entraîner un impôt supplémentaire? · Nuvei v. Arrap - NSW Supreme Court finds that a post-closing voluntary disclosure by the target so as to deplete escrowed funds did not violate a duty to cooperate with the vendor

Escrow Funds

Escrow Funds (Une erreur comptable peut-elle entraîner un impôt supplémentaire? · Nuvei v. Arrap - NSW Supreme Court finds that a post-closing voluntary disclo…

Ideas in this flowchart

  • Pre-closing escrow arrangement for potential Australian withholding tax liability
  • Nuvei identified a potential additional withholding tax liability
  • The deemed dividend may have been subject to the 30% non-treaty withholding tax rate
  • The 15% Australia-U.S. Treaty rate generally applied
  • The US LLC and LLP investors had not established that their ultimate owners were US residents
  • Nuvei and the Australian sellers, Arrap, agreed to place part of the purchase price into escrow
  • The escrow period was 18 months
  • The escrowed funds were intended to cover the potential additional withholding tax liability
  • If the ATO made no determination within 18 months that the additional withholding tax was payable, the funds would be released to Arrap
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Une erreur comptable peut-elle entraîner un impôt supplémentaire?

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"Prior to the closing of the purchase of the shares of an Australian company (the “Company”), the Australian purchaser (“Nuvei”) identified that a deemed dividend paid by the Company may have been subject to withholding tax at the non-treaty reduced rate of 30%, rather than the 15% rate generally applicable under the Australia-U.S. Treaty, given that the various US LLC and LLP recipients of the deemed dividend (the “investors”) had not established that their ultimate owners were residents of the US. It agreed with the Australian sellers (“Arrap”) that a portion of the purchase price would be placed into escrow for 18 months to cover off this potential liability, and that if there was no “determination” by the Australian Taxation Office (“ATO”) within the 18-month period that the additional withholding tax was payable, the escrowed funds would be released to Arrap."

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