Clause guide
Taxes Clause clause: meaning, risks, and what to negotiate
Explains which party is responsible for taxes connected with the contract and how invoices should handle them.
What it means
Tax clauses affect the real contract price and who bears risk for VAT, sales tax, withholding tax, and similar charges.
Common risks
- • The contract price may not include all taxes.
- • Withholding taxes may reduce payments received.
- • Invoice disputes can arise if tax treatment is unclear.
What to check before signing
- • Which taxes are included in the fees and which are extra?
- • Who is responsible for withholding taxes?
- • Are valid tax invoices required?
Negotiation ideas
- • State clearly whether fees are inclusive or exclusive of taxes.
- • Include gross-up language where appropriate for withholding tax risk.
- • Require reasonable cooperation on tax documentation.
Example clause
“Fees are exclusive of any applicable sales, use, value added, or similar taxes, which shall be payable by Client, excluding taxes based on Provider’s net income.”
Frequently asked questions
Why does a taxes clause matter?
Because unclear tax wording can change the real economics of the deal and create invoice disputes.
Related clauses
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