Tax considerations on a loan agreement—the tax credit clause

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Tax considerations on a loan agreement—the tax credit clause
  • Definitions
  • Determines
  • Finance party
  • Obligor
  • Tax credit
  • Tax deduction
  • Tax payment
  • Treaty lender
  • UK PE
  • More...

Tax considerations on a loan agreement—the tax credit clause

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 ( In addition, the Association of Corporate Treasurers (ACT) also produces a helpful guide to the LMA loan agreements for investment grade borrowers, ‘The ACT Borrower’s Guide to the LMA’s Investment Grade Agreements’, which is available on its website (see for the September 2017 updated version and for earlier versions). Since the ACT guide is produced by Slaughter and May for the ACT, the September 2017

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