This Practice Note:

1. •

   explains:

   1. ◦

      the purpose of the tax credit clause that is normally found in a loan agreement, and

   2. ◦

      that the standard drafting of the tax credit clause is lender-friendly and how this limits the benefit for a borrower, and

2. •

   provides drafting suggestions to help a borrower obtain the benefit of a tax refund or rebate from a treaty lender

In the context of syndicated Loans made to corporate borrowers, it is standard to use one of the model loan facility agreements of the Loan Market Association (LMA), all of which:

1. •

   contain a standard tax credit clause

2. •

   are drafted in a lender-friendly way, and

3. •

   assume that the Relevant tax is UK Withholding Tax—it is important to ascertain which jurisdiction's withholding tax is relevant and, if this is not UK withholding tax, amend the agreement appropriately

The LMA's model loan agreements are available to its members on the LMA website (www.lma.eu.com). In addition, the Association of Corporate Treasurers (ACT) also produces