Canada: Carefully Consider US Tax Effects Of Canadian "Prescribed-Rate Loan" Strategy

Last Updated: September 12 2013
Article by Kim G.C. Moody

On October 1, 2013 the "prescribed rate" in Canada is set to rise from one percent to two percent and, predictably, taxpayers and advisors are feverishly working to execute prescribed-rate loans between related parties to take advantage of this popular income splitting strategy before the prescribed rate doubles. Unfortunately, in the fury to beat the October 1, 2013 deadline, too many people have ignored the US tax consequences of this strategy when one or more family members (including a spouse or child) are US citizens, US residents, or US green card holders.

Prescribed-rate loans are an elegant and common strategy to income split amongst Canadian family members and an abundance of ink has been spilled over the years on this strategy. However, until this article, nary a drop of ink has been spilled on analyzing the tax consequences of a prescribed-rate loan strategy when one of the participants is a US person.

Few would argue that both Canadian and US tax law are complex and nuanced, and different outcomes are dependent on a taxpayer's particular facts. This article, therefore focuses on the identification of salient issues and the legal framework for individual analysis. Full legal analysis of all factual permutations would require us to spill more ink than all but the most astute (or is "twisted" a better word?) tax minds would find useful.

Background on prescribed-rate loans

In Canada, unlike the US, married or common-law partners do not have the ability to file joint tax returns. If the two individuals have widely disparate income levels the result is that in Canada the couple will pay more tax in aggregate than if individuals were combined. This result encourages families to explore strategies to split income amongst lower income family members to achieve a lower overall tax rate.

The uninformed may attempt to achieve this result by simply making a gift of capital or other property transfer from the high income earner to the low income earner. Unfortunately, this simple strategy does not work for Canadian income tax purposes because Canada has a robust body of "attribution rules" (obvious examples being subsections 56(2), 56(4.1), 74.4(2), 75(2) and sections 74.1, 74.2 and 74.3 of the Income Tax Act (the "Act")). When the attribution rules apply, the usual result is that income from the gifted property will be attributed back to the transferor and taxed to him or her personally. Obviously, this result defeats the tax purpose of the initial transfer.

Fortunately, however, section 74.5 of the Act provides a tool to avoid the application of the attribution rules. In general, this section exempts from the attribution rules (and resulting income and gains) loans to family members under certain circumstances, notably when interest on the obligation is at the "prescribed rate" set forth in the Act and regulations. As long as the accrued interest is no less than the prescribed rate and is paid by the borrower to the lender no later than January 30 of the following calendar year for each year then the attribution rules under sections 74.1, 74.2 and 74.3 of the Act will not apply.

The prescribed rate is set quarterly by the Government of Canada and is determined with reference to the short term Government of Canada T-Bill rates. The prescribed rate has been at a historic low of one percent since the second quarter of 2009.

The simple example below illustrates how a prescribed-rate loan works in practice. Let us assume the following facts:

  1. Mr. and Mrs. Maple Leaf are Canadian residents and not US citizens or residents.
  2. Mr. Maple Leaf is in the highest tax bracket and Mrs. Maple Leaf is in the lowest tax bracket.
  3. Mr. and Mrs. Maple Leaf have two minor children who are also Canadian residents and not US citizens or residents.
  4. Mr. Maple Leaf would like to split some of the investment income generated from his investment portfolio with Mrs. Maple Leaf and his children.
  5. Mr. Maple Leaf's historical investment return and expected future return is five percent (for simplicity, let us assume that such return is in the form of interest).

Given these facts, the taxpayers execute the following transactions:

  1. On January 1, 2012, a friend of Mr. Maple Leaf created a Canadian resident trust – the Maple Leaf Family Trust – for the benefit of the Maple Leaf family. Mr. Maple Leaf is the trustee of the trust and the income and capital beneficiaries of the trust are all of the members of the Maple Leaf family.
  2. On January 2, 2012, Mr. Maple Leaf loaned $1,000,000 in the form of cash to the Maple Leaf Family Trust.
  3. The interest rate on the loan was the prescribed rate at that time, one percent.
  4. The Maple Leaf Family Trust invested the funds in a portfolio account of publicly traded bonds and realized approximately $50,000 of investment return on its portfolio for the year ended December 31, 2012.
  5. The Maple Leaf Family Trust paid $10,000 of interest to Mr. Maple Leaf no later than January 30, 2013.
  6. The trustees of the Maple Leaf Family Trust decided to allocate the net investment return of $40,000 to Mrs. Maple Leaf and their two children beneficiaries equally ($13,333 each).

Those poor minds indoctrinated in Canadian tax law will note that the "kiddie tax" under section 120.4 of the Act will not apply for the amounts allocated to the child beneficiaries since the trust income was generated from publicly traded portfolio assets and the kiddie tax does not apply to such income received by minors.

The same result could be achieved by having Mr. Maple Leaf loan monies directly to Mrs. Maple Leaf without the use of a trust if it was felt that there was no benefit to income splitting with the children.

US tax issues

When a US person (either a US citizen, US resident, or US green card holder) participates in a prescribed-rate loan strategy the analysis gets very interesting (trust us on this). US tax law has a multitude of different rules regarding the estate tax, taxability of interest, below market loans, above market loans, the deductibility of interest, trusts, trust distributions, and its own attribution rules, the confluence of which can cause the prescribed-rate loan strategy to backfire.

The US tax issues will vary depending on whether the lender or the borrower is the US person, and whether the loan is made to an individual or to a trust. In order to discuss these variables without resorting to color-coded diagrams, let us assume the following:

"Mr. (Maple Leaf or Bald Eagle)" and "Mrs. (Maple Leaf or Bald Eagle)" are married.

  1. Both spouses are Canadian residents.
  2. One spouse, "Bald Eagle" is a US citizen.
  3. The other spouse, "Maple Leaf" is not a US citizen or US resident.
  4. "Mr. (Maple Leaf or Bald Eagle)" is the individual who lends capital at the prescribed rate.
  5. "Mrs. (Maple Leaf or Bald Eagle)" is the individual who borrows capital at the prescribed rate.
  6. Therefore "Mr. Maple Leaf" is a Canadian resident and not a US citizen or resident who loans capital at the prescribed rate to his spouse, "Mrs. Bald Eagle," who is a Canadian resident and US citizen.
  7. Conversely, "Mr. Bald Eagle" is a Canadian resident and US citizen who loans capital at the prescribed rate to his spouse, "Mrs. Maple Leaf," who is a Canadian resident and not a US citizen or US resident.

We will use these facts to explore the US tax consequences to the parties in the following circumstances:

  1. Canadian husband (Mr. Maple Leaf) makes loan to US wife (Mrs. Bald Eagle).
  2. US husband (Mr. Bald Eagle) makes loan to Canadian wife (Mrs. Maple Leaf).
  3. Canadian husband (Mr. Maple Leaf) makes loan to a trust.
  4. US husband (Mr. Bald Eagle) makes loan to a trust.

A. Mr. Maple Leaf loans capital at the prescribed rate to Mrs. Bald Eagle

1.     US tax consequences to Mr. Maple Leaf

     i.     Promissory note is "US Situs" asset and subject to US estate tax

Canadian residents who are not US citizens or residents are subject to the US estate tax only to the extent they possess assets within the US ("US situs property") at the date of death. Section 2104(c)(1) of the Internal Revenue Code ("IRC") deems debt obligations of US persons to be US situs. Therefore, Mr. Maple Leaf will be subject to the US estate tax on the value of the promissory note if he dies before it has been repaid. Further, if Mr. Maple Leaf's will cancels the obligation, or if the cancelation feature is found in the note itself, or (in some cases) is transferred within three years of the date of death, section 2104(b) of the IRC will nonetheless include the value of the note in Mr. Maple Leaf's US estate for estate tax purposes.

     ii.     Promissory note is NOT US situs asset for gifting and therefore generally not subject to gift tax upon transfer per section 2501(a)(2)of the IRC

Generally the US estate tax and gift tax act as two sides of the same coin. Namely, property given away during life is subject to the gift tax and property held at death is subject to the estate tax. The "credit equivalent" (currently $5,250,000) is available either during life (for the gift tax) or at death (for the estate tax), but not both. As with the US estate tax, the gift tax applies to the transfer of property that is within the US ("US situs property"). However, the definition of US situs property for gift tax purposes excepts intangible assets located within the US under section 2501(a)(2) of the IRC.

Therefore, Mr. Maple Leaf would be able to transfer the promissory note by gift and incur no US gift tax or estate tax. Note, as mentioned above, transfers within three years of death risk being brought back into the estate under certain circumstances.

     iii.     If Mrs. Bald Eagle is "resident" in the US at any time payment is made, then the interest is US sourced income, per section 871(a)(1) of the IRC

If the interest payments Mrs. Bald Eagle makes to Mr. Maple Leaf are "US sourced" then section 871 of the IRC may cause them to be taxable in the US, unless such payments qualify for the portfolio interest exception of section 871(h) of the IRC. Interest payments are "US sourced" if they are made by a US resident per section 861(a)(1) of the IRC. Regulation section 301.7701(b)-1(a) provides that, for purposes of determining whether a US citizen is a US resident for purposes of section 861, we are to apply the principles found in section 301.7701(b)-1(c), including the "Substantial Presence Test."

In order to qualify for the portfolio interest exception, section 871(h)(2)(B)(ii)(I) of the IRC obligates Mrs. Bald Eagle to obtain an executed form W-8BEN from Mr. Maple Leaf in order to be relieved of her withholding obligations. See the analysis in b.ii below for more of Mrs. Bald Eagle's obligations in this regard.

Even if the interest paid to Mr. Maple Leaf is US sourced and not eligible for the portfolio interest exception, Article XI(1) of the Canada-US Treaty provides that interest "arising in the US" but paid in Canada will be taxable only in Canada. Article XI(2) of the Treaty provides that interest "arises in the US" if it is paid by a resident of the US.

Thus in most cases, regardless of whether Mrs. Bald Eagle is a resident at the time interest payments are made, Mr. Maple Leaf will not be subject to US tax on the interest payments he receives.

2.    US tax consequences to Mrs. Bald Eagle

i.     Mrs. Bald Eagle can deduct the debt from her estate only if it is bona fide, per Estate of Derksen 110 AFTR 2012-6620 (DC Pa., 2012)

In determining the taxable estate of a US citizen; section 2053 of the IRC allows a deduction for claims against an estate. If the claim is based on a promise to pay, the estate must show that there was a bona fide contract, promise, or agreement made for adequate financial consideration and that the claim was an enforceable obligation that existed on the date of the individual's death. If the estate is unable to satisfy its burden then the deduction will be disallowed.

In Derksen, the decedent's estate was denied a deduction for a promissory note between the decedent and her spouse because, according to the court's analysis, the obligation was not bona fide. The court set forth a five factor test to establish whether the obligation was bona fide.

     ii.     Mrs. Bald Eagle must obtain W-8BEN if she is resident in the US when interest payments are made in order to be relieved of withholding, and only if interest payments are "portfolio" interest, per section 871(h) of the IRC

As discussed in a:iii above, in order to qualify for the portfolio interest exception, Mrs. Bald Eagle must obtain from Mr. Maple Leaf the form W-8BEN, which is not filed with the IRS, but must be retained by Mrs. Bald Eagle. Ordinarily Mrs. Bald Eagle must also prepare and submit the form 1042-S in order to notify IRS of source withholdings, however if the interest qualifies as portfolio interest this form need not be filed with the IRS. The failure to obtain the W-8BEN can be subject to penalties and interest if it is later found that the treaty exemption does not apply and withholding is required.

     iii.     Mrs. Bald Eagle can deduct interest only if it qualifies as "investment Interest," per section 163(d)(3) of the IRC, and is subject to limitation as a miscellaneous deduction

Mrs. Bald Eagle's ability to deduct the interest paid to Mr. Maple Leaf is limited by the rules set forth in section 163 of the IRC. The general rule is that "personal interest" is not deductible but other forms of interest, notably "investment interest," are deductible.  Section 163(d) of the IRC defines investment interest to mean interest which is paid or accrued on indebtedness properly allocable to property held for investment, which would usually include interest paid on a loan at the prescribed rate.

Even if the interest payment qualifies as investment interest, the deduction allowed is limited to  the "net investment income" that can be traced to the loan proceeds. Section 163(d)(4) of the IRC provides that net investment income is investment income in excess of investment expenses. Thus, if Mrs. Bald Eagle pays $10,000 in interest to Mr. Maple Leaf and her net investment income is only $8,000, she will be permitted to deduct $8,000 and the difference ($2,000), may be carried forward for use in subsequent years.

It is important to note that the interest deduction allowed per section 163 of the IRC may not be fully available to Mrs. Bald Eagle because interest is a "miscellaneous deduction." Generally Mrs. Bald Eagle will take the greater of the "standard deduction" or, the sum total of allowable miscellaneous deductions. The standard deduction in 2013 for a married individual filing separately is $5,950 ($11,900 if married filing jointly). Thus, if Mrs. Bald Eagle is filing a separate return and  pays less than $5,950 in interest she will, effectively, obtain no US tax benefit for the interest she pays to Mr. Maple Leaf.

iv.     Mrs. Bald Eagle can deduct interest payment only on the later of payment or Mr. Maple Leaf's inclusion in income, per section 267(a)(2), (3) of the IRC

Section 267 of the IRC provides rules for the timing of deductions that result from payments between related parties, including husband and wife. Sections 267(a)(2) and (3) of the IRC provides that Mrs. Bald Eagle will not be able to deduct the interest paid until the later of the year: a) payment is actually made; and b) Mr. Maple Leaf's inclusion of this amount in his income.

These rules will delay Mrs. Bald Eagle's interest deduction for US purposes if she makes payment after December 31 of the tax year, which would be the case if, as permitted by Canadian law, the payment is made after December 31 and before January 30 of the following year.

     v.     If interest is less than the applicable Federal rate ("AFR") the interest paid by Mrs. Bald Eagle will be part-gift and part-loan per section 7872 of the IRC

Section 7872 of the IRC provides that when the interest rate on a debt obligation is less than the AFR, the interest paid is recast as part-interest and part-gift. The below-market amount is deemed paid by Mrs. Bald Eagle (and subject to the limitations on interest deductibility set forth above) and received as a gift to her by Mr. Maple Leaf.

Section 7872(f)(2)(B) provides that the AFR for demand obligations is the federal short-term rate compounded annually. As of the September 1, 2013 this rate is .23 percent per annum.  Thus, until the applicable federal rate increases to a level above the Canadian prescribed rate, the part-gift and part-interest results of section 7872 will not apply.

If the provisions of section 7872 do apply, however, Mrs. Bald Eagle may have reporting obligations resulting from the "gift interest" she receives from Mr. Maple Leaf. Generally, Mrs. Bald Eagle will be obligated to report this gift interest on form 3520 when it, combined with all other gifts and bequests, exceeds $100,000 per year in aggregate per section 6039F of the IRC.

vi.     Above market loan would have gift tax consequences and result in denial of interest deduction

If the interest paid on the loan is above market, as it is when the prescribed rate is greater than the AFR, Mrs. Bald Eagle is deemed to have made a gift to Mr. Maple Leaf of the excess upon per section 2512 of the IRC. As such, the gift could trigger gift tax if in excess of the annual exclusion provided in section 2523(i)(2) of the IRC, which is $139,000 per annum for 2012. Further, section 163 of the IRC would deem the gift interest to be personal interest and deny a deduction for payment thereon.

B. Mr. Bald Eagle loans capital at the prescribed rate to Mrs. Maple Leaf

2.     US tax consequences to Mr. Bald Eagle

i.    If interest is less than the AFR the interest paid will be part-gift and part-loan per section 7872 of the IRC

As discussed above, if the interest on the loan is less than the AFR, Section 7872 of the IRC will reclassify the payment as part-interest and part-gift. The extent to which the interest is below market will be deemed paid by Mrs. Maple Leaf to Mr. Bald Eagle and included in his income for US tax purposes. Mr. Bald Eagle is then deemed to make a gift of that amount back to Mrs. Maple Leaf. If this gifted interest is in excess of the annual exclusion provided in section 2523(i)(2) of the IRC Mr. Bald Eagle may incur a gift tax liability and will be obligated to report the amount on the form 709.

ii.     Mr. Bald Eagle may have to report the loan on form 8938

For tax years beginning 2011 section 6038D of the IRC obligates US persons to report certain "specified foreign assets" on the form 8938. Section 6038D(b)(2)(B) of the IRC would include a promissory note from Mrs. Maple Leaf to be a specified foreign asset. The failure to file the form 8938 when required can trigger a penalty of US $10,000 and reduction of certain other tax attributes.

     iii.     Mr. Bald Eagle may be subject to 3.8 percent tax per section 1411 of the IRC on the interest received

In 2010, the US Congress passed the Patient Protection and Affordable Care Act, which included new section 1411 of the IRC. The purpose for new section 1411 of the IRC was to raise revenue to fund the US's version of socialized healthcare.  To that end, and beginning January 1, 2013, section 1411 of the IRC imposes on US citizens and US residents a 3.8 percent tax on the lesser of: a) the taxpayer's net investment income; or b) the "modified adjusted gross income" less the "applicable threshold."  The applicable threshold is $125,000 for married taxpayers filing separately.

Thus, if Mr. Bald Eagle's net investment income and modified adjusted gross income is high enough, he will incur this additional 3.8 percent tax on the interest payments he receives from Mrs. Maple Leaf.  While this 3.8 percent additional tax can come as a very nasty surprise, the news gets worse.

The US foreign tax credit is granted under section 27 of the IRC but is available only against those taxes found in chapter 1 (sections 1 through 1400U). The 3.8 percent tax is found in section 1411 (chapter 2a to be precise) and therefore is not eligible for the foreign tax credit. The result could be double taxation to Mr. Bald Eagle on this incremental amount.

2.     US tax consequences to Mrs. Maple Leaf

Mrs. Maple Leaf is the fortunate one in the foregoing scenarios as there are only indirect US and tax filing obligations (i.e., those of her husband, Mr. Bald Eagle) resulting from the loan from her US citizen husband.

C. Mr. Maple Leaf makes loan to a Canadian Trust (the "Trust") at the prescribed rate. Mr. Maple Leaf is the trustee and a discretionary beneficiary and Mrs. Bald Eagle is a discretionary beneficiary

1.     US tax consequences to Mr. Maple Leaf

i.     If the trust is a US Domestic Trust, Mr. Maple Leaf will own a "US situs" asset for US estate tax and may have US source income.

Just as discussed in 1.a:i and iii, above, if the maker of the promissory note, the Trust, is considered a US trust then the obligation will have US situs for US estate tax purposes, and the interest Mr. Maple Leaf receives may be US sourced.

Trust will be considered a US trust only if it satisfies both the "courts test" and "control test" set forth in Regulation section 301.7701-7. Generally speaking, the "courts test" is satisfied if a US court can exercise primary supervision over the administration of the trust. Similarly, the "control test" is satisfied if US persons control all substantial trust decisions. Since Mr. Maple Leaf is a Canadian resident and not a US citizen or resident, it is unlikely that the Trust will be considered a US trust, and therefore the interest paid by the trust will not likely be considered US source.

2.     US tax consequences to Mrs. Bald Eagle

     i.     Distributions to Mrs. Bald Eagle may be subject to "Throwback Tax," per section 665 of the IRC

Assuming Trust is not a US trust, distributions to Mrs. Bald Eagle may be subject to the Throwback Tax imposed by section 665(a) of the IRC, which seeks to treat a US beneficiary as having received income of the trust in the year in which it was earned. The result is that undistributed net income of the trust subsequently distributed to Mrs. Bald Eagle is taxed at the highest marginal rates for the year in which it was earned by the Trust (and not the year of distribution). In addition, section 865 of the IRC adds an interest charge, which accrues from date of the income was earned and ends on the date of distribution. The result can be little or no net-tax benefit to the US beneficiary.

     ii.     Mrs. Bald Eagle may have reporting obligations on form 3520, per section 6048(C)of the IRC

Assuming Mrs. Bald Eagle is not considered an "owner" of the Trust because she has no power as a trustee or otherwise, section 6038(c) requires her to report any distributions to her on the form 3520. Section 6677 of the IRC imposes a penalty of 35 percent of the distribution for failure to timely file the form 3520 to report a distribution.

D. Mr. Bald Eagle makes a loan at the  prescribed rate to a Canadian discretionary trust (the "Discretionary Trust"). Mr. Bald Eagle is the is the trustee and a discretionary beneficiary, and Mrs. Maple Leaf is also a discretionary beneficiary

 1.     US Tax Consequences to Mr. Bald Eagle

i.     Loan to the Discretionary Trust triggers Mr. Bald Eagle's obligation to file forms 3520 and 3520-A, per section 6048 of the IRC

Section 6048 of the IRC provides that when Mr. Bald Eagle makes a loan to the Discretionary Trust he will be obligated to give notice to the IRS by filing form 3520. Section 6677 of the IRC provides that the penalty for failure to file the form 3520 when due is 35 percent of the gross value of the property transferred to the trust.

Since Mr. Bald Eagle is the trustee of the Trust, the "Grantor Trust Rules" found in sections 672-679 of the IRC will deem him to the be the "owner" of the Trust. As the owner of the Discretionary Trust he will be obligated to file the form 3520-A annually for the trust per section 6048(b) of the IRC. Per section 6677 of the IRC the penalty for failure to file the 3520-A when due is five percent of the gross value of the assets considered owned by Mr. Bald Eagle, which in this case is all of them.

     ii.     As a Grantor Trust, Mr. Bald Eagle will be currently taxed on all income generated by the Discretionary Trust regardless of distribution, accumulation, or allocation to another beneficiary, which can result in double taxation to Mr. Bald Eagle

Since the Discretionary Trust is a grantor trust per sections 672-679 of the IRC, the trust itself will be disregarded for US income tax purposes and, instead, Mr. Bald Eagle will be taxable on the income generated by the Discretionary Trust. This is the case regardless of whether the income is accumulated, distributed, or allocated to another beneficiary.

Further, since the Discretionary Trust is disregarded for US purposes, the interest the trust pays to Mr. Bald Eagle is ignored, as is the income, if any, he receives from the Discretionary Trust. As a result, for US tax purposes (aside from the reporting obligations mentioned above) the Discretionary Trust is treated as if it did not exist but, rather, that Mr. Bald Eagle owned the Trust's assets directly.

At first blush, this result may seem rather banal: nothing was gained but nothing was lost. Upon closer examination, however, it is clear that exactly the opposite is true and that we've actually conjured the demon that haunts all tax practitioners: double taxation.  Double taxation will occur when, for Canadian purposes, anyone other than Mr. Bald Eagle recognizes the income generated by the Discretionary Trust, such as when the income is allocated to Mrs. Maple Leaf.

In that case, Mrs. Maple Leaf recognizes the income for Canadian purposes but, as noted earlier, Mr. Bald Eagle recognizes the income for US purposes. Since Mr. Bald Eagle pays no Canadian tax on the income he will not be eligible for the foreign tax credit under section 901 of the IRC. The result is double tax to the combined marital unit.

2.     US Tax Consequences to Trust and Mrs. Maple Leaf

As noted earlier, since the Discretionary Trust is disregarded for US purposes, neither it nor Mrs. Maple Leaf will incur US tax consequences. The only US tax consequences that will flow from the structure will be to Mr. Bald Eagle directly.

Concluding comments

While "prescribed-rate loans" are certainly effective Canadian income splitting vehicles when used properly, the addition of a US person into such planning can add significant and dramatic complexity. Such complications can come in the form of US income tax, gift tax, estate tax and additional reportings (with nasty penalties for failure to file such forms on a timely basis).

A good fiction author will ensure that all of the characters in his story are fully identified and developed. The same principle applies when engaging in prescribed rate loan planning: make sure you understand if the "characters" are US citizens, residents or green card holders so the story does not end in tragedy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Kim G.C. Moody
Events from this Firm
18 Oct 2018, Webinar, Calgary, Canada

On Dec. 22, 2017, President Trump signed into law the biggest US tax reform bill in 31 years, changing the lives of Americans at home and abroad. Many US residents will see an immediate benefit on their 2018 tax return, but for US expats and green card holders living abroad, things may have changed for the worse.

20 Oct 2018, Seminar, Vancouver, Canada

On Dec. 22, 2017, President Trump signed into law the biggest US tax reform bill in 31 years, changing the lives of Americans at home and abroad.

27 Oct 2018, Seminar, London, UK

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Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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