3.16 - Cga

1. Overview & Context What is the CGA? The Common Global Agreement (CGA) is a model contract developed by the Telecommunications Industry Dialogue (TID) and supported by the GSMA . It governs the commercial and technical relationship between two or more international telecom carriers (e.g., wholesale voice, SMS, data roaming). What is CGA 3.16? CGA 3.16 refers to a specific clause or subsection within the CGA framework – typically Section 3, Clause 16 , though numbering can vary slightly by revision year. The most common reference (e.g., in CGA 2020, 2022 revisions) is: Clause 3.16 – Tax Gross-Up and Withholding Tax Obligations Thus, CGA 3.16 deals exclusively with tax handling , specifically gross-up payments and indemnification for withholding taxes . Note: In some older versions (CGA 2009/2012), 3.16 might refer to “Invoicing and Payment Disputes” – always confirm the revision year. This guide covers the prevailing modern usage. 2. Full Text of Typical CGA 3.16 (Paraphrased from Real Contracts) “3.16 Taxes and Gross-Up

(c) The Paying Party shall the payment so that the Receiving Party receives the full amount that would have been due without the withholding tax, unless the withholding tax arises because the Receiving Party fails to provide a required tax exemption certificate or has a permanent establishment in the Paying Party’s country. cga 3.16

If any withholding tax is required by law to be deducted from a payment by Paying Party to Receiving Party, Paying Party shall: (i) deduct the minimum required amount; (ii) pay the net amount; (iii) pay withheld tax to the authority within legal deadlines; (iv) provide an official tax receipt within 30 days. It governs the commercial and technical relationship between

(b) If a withholding tax is required by applicable law to be deducted from a payment by the Paying Party to the Receiving Party, the Paying Party shall: (i) deduct the required amount; (ii) pay the net amount to the Receiving Party; (iii) pay the withheld amount to the relevant tax authority; and (iv) provide the Receiving Party with an official tax receipt or certificate of deduction within 60 days. The most common reference (e

(d) Each Party shall cooperate to minimize withholding taxes (e.g., by applying double taxation treaties). (e) Indemnification: If a tax authority imposes a withholding tax on the Receiving Party due to the Paying Party’s misrepresentation of tax status, the Paying Party shall indemnify the Receiving Party in full.” | Term | Meaning | |------|---------| | Gross-up | Increasing a payment so that after tax deduction, the recipient gets the originally agreed amount. | | Withholding tax | Tax deducted at source (e.g., on cross-border service payments) by the payer’s country. | | Paying Party | Carrier making payment under the CGA. | | Receiving Party | Carrier receiving payment. | | Exemption certificate | Document proving no withholding tax applies (e.g., treaty relief). | | Permanent Establishment (PE) | A fixed place of business in the other country, which can trigger local taxation. | 4. How CGA 3.16 Works – Step-by-Step Step 1: Invoice is issued Carrier A (USA) bills Carrier B (Germany) $10,000 for termination services. Step 2: Check for withholding tax German law requires 15% withholding tax on payments to US entities without a treaty form. Step 3: Withholding applied (if no exemption) Carrier B deducts $1,500, sends $8,500 to Carrier A. Step 4: Gross-up clause applies CGA 3.16 says: Carrier B must gross up to $11,764.71 so that after 15% deduction, Carrier A still gets $10,000.

Paying Party shall gross-up the payment so that Receiving Party receives the full amount due, the withholding arises solely because Receiving Party: (a) fails to provide a valid tax exemption certificate within 30 days of request; (b) has a PE in Paying Party’s country; or (c) changes its tax residence without notice.