Withholding Tax
In certain circumstances funders or customers based overseas may be required to withhold a percentage of payments due the University and pay that amount over to their local tax authority.
This payment is referred to as a withholding or withholding tax. In this context the term withholding tax is intended to mean any amount which an overseas party deducts from a payment made to the University or a subsidiary of the University (Warwick)
Whether withholding tax should be deducted from, and the percentage applied to payments made to Warwick, is determined by the domestic tax laws of the country in which the payer is situated, and by double tax treaties between the UK and that country. Sometimes a reduced or nil rate of withholding tax can be obtained under the treaty by completing tax forms in the country and/or by obtaining a certificate from HMRC.
The withholding tax requirements of countries are many and varied and cannot be predicted without looking in detail at each case.
Whilst commercial organisations can often recover withholding tax, because of its tax status Warwick and its subsidiaries will not normally be able to.
We are aware of tax being deducted from payments to Warwick from the following countries:
- China
- India
- Ireland
- Kazakhstan
- Korea
- Malaysia
- Saudi Arabia
- Uzbekistan
But please note this list is based on historic experience and is not intended to be exhaustive.
To protect Warwick commercially we should always aim to insert a clause into agreements to ensure that we are paid the full amount regardless of withholding tax requirements (a gross up clause- see below) with an overseas organisation since if a funder/customer considers that they are obliged to deduct tax they will do so regardless of whether we consider that to be technically correct. An overseas entity may be unlikely to negotiate on this point because they will bear the immediate risk of any unpaid taxes.
However, if amounts are significant the Tax Team should be contacted to review the agreement as we may be setting an unwanted precedence for future contracts if we accept withholding applies when this is technically incorrect.
Where withholding tax is paid whether by gross up or by deduction, we should ask the customer to provide a copy of receipts of payment from their respective tax authority. It would be best practice to write this obligation into the contract.
If a gross up clause is not accepted or if a customer requests it, a certificate of residency can be provided. If this is required, please contact the Tax Team. Other tax forms will only be completed if the amounts at stake are significant, and any requests must be discussed with the Tax Team before making any commitment to the overseas party.
Any amounts of withholding tax deducted from the payment of our invoice should be written off to your project or profit centre code.
Should you have any questions or require more details please contact the Tax Team at
Jo Ray
Group Head of Tax
Updated 9th October 2023
Appendix A
Standard Gross up Clause where payments are being made to Warwick from an overseas organisation.
- All sums payable by the [Company] under this Agreement are to be made free and clear of all deductions or withholdings of whatever nature. If a deduction or withholding is so required, the [Company] shall pay such additional amount as will ensure that the net amount received by the [University] equals the full amount which it would have received had the deduction or withholding not been required. [University] shall not be compelled to take any steps to mitigate any liability which the [Company] may incur in this regard.
- Where withholding taxes are paid the [Company] should provide copies of tax receipts to [University] within 30 days of the payment being made.
- The [University] will be indemnified to the fullest extent by the [Company] for any taxes relating to the country in which the [Company] is located or other local taxes that are imposed on the [University] in conjunction with or arising from the matters described in this Agreement.