Withholding Tax
In certain circumstances funders or customers based overseas may be required to withhold a percentage of a payment due to the University and pay that amount over to their local tax authority.
This payment is referred to as a withholding or withholding tax (WHT). In this context the term WHT 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 WHT should be deducted, and the percentage applied to payments made to the University, 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 residency certificate from HMRC.
The WHT requirements of countries are many and varied and cannot be predicted without looking in detail at each case.
Whilst commercial organisations can often recover WHT, because of its tax status the University and its subsidiaries will not normally be able to.
We are aware of tax being deducted from payments to Warwick from the following countries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
But please note this list is based on historic experience and is not intended to be exhaustive.
Since the UK exited the EU, we have also received requests from EU countries for the provision of a valid Tax Residency certificate (even when we do not believe any WHT applies), with customers refusing to sign agreements or make payments until the certificates are provided.
Please be aware that Residency certificates are issued by HMRC and each University Group company needs individual documents for each country and these need to be in-time. Therefore, if we have not previously requested a certificate for a particular country it may take c 6 weeks from the date of the application for it to be received. Once a country certificate is obtained the Tax team will seek to renew these as a matter of course to keep them up to date.
Failing to consider WHT when entering agreements and/or to take the appropriate action in negotiating terms may result in a loss of income to the University or its subsidiaries, where customers deduct WHT (which can be up to 30% of the contract) from their payments.
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 WHT requirements (a gross up clause- see Appendix A 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 not accept this clause because they will bear the immediate liability for these taxes.
In this case budgets need to be amended. However, instead a clause needs to be added stating that the funder will provide whatever support is necessary to ensure any lower rate of WHT that is available under the Treaty is obtained.
If amounts are significant, the Tax Team should be contacted to review the agreement to see if local advice should be sought to establish if the WHT is correctly applied.
Where WHT is paid whether by gross up or by deduction, we should ask the customer/funder to provide a copy of receipts of payment from their respective tax authority as in some countries (e.g. India) the University will be liable for any under payment of WHT by the payor. It would be best practice to write this obligation into the contract.
If a customer requests it, a certificate of residency can be provided. If this is required, please contact the Tax Team at
. Except for the US, which requires a W8-BEN and Portugal, which requires a MOD 21_RFI 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 WHT deducted from the payment of an invoice will be written off to the department’s 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 30th January 2025
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.