Securitization Withholding Tax Risk Highlighted by S&P

In a bid to add clarity to the issues surrounding withholding tax in structured finance transactions, Standard & Poor’s has published a legal criteria article which describes the ‘comforts’ the rating agency expects to receive when making a transaction. ‘There is a heightened risk of withholding tax when cash flows across a jurisdictional border,’ said Julie Lynch Bridson, Standard & Poor’s assistant general counsel. ‘In these instances, the tax authorities in the jurisdiction from which the cash left may require part of that amount to be remitted to it in the form of withholding tax.’ Bridson explained that the risk of withholding tax is particularly acute in the European securitization market, where cash is passed from payers in one country to an SPE issuer in another country.

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