Acupay helps Heritage Petroleum reduce its gross-up costs on its cross-border US notes
A Promising Opportunity for Issuers Globally
In May 2022, Heritage Petroleum Company Limited (Heritage), the state-owned oil company of the Republic of Trinidad and Tobago and the production subsidiary of Trinidad Petroleum Holdings Limited (TPHL) completed the issuance of U.S. $500,000,000 9.000% Senior Secured Notes due 2029. The Heritage issuance employed a tailored version of Acupay’s innovative tax certification and compliance mechanics.
The first payment of interest took place on February 14, 2023. In accordance with the notes offering documentation, Heritage grossed-up Trinidad & Tobago’s 15% statutory withholding tax (WHT) with all investors receiving 100% of their payment of interest. Using Acupay’s tax certification process, Heritage was subsequently able to reduce its WHT tax burden related to this payment.
This has been added to Acupay’s numerous success stories. Since 2005, Acupay’s cross-border tax expertise and innovative technology has been building solutions that help issuers access foreign debt capital markets, while ensuring that eligible investors can benefit from available withholding tax reductions, or exemptions, on their income payments.
How It Worked
Immediately after the payment, Acupay obtained position report data from DTC, which was ingested by the Acupay System, and organised communications for all DTC participants through which the Heritage notes were held as of the Record Date.
The Acupay System was set up to collect beneficial owner data and documentation from DTC Participants on behalf of the investors. The data and documentation requested by our system was aligned with the requirements and procedures of the local tax authority (the Inland Revenue Service) and the double taxation agreements which are in place between Trinidad & Tobago and the investors’ countries of tax residence.
The collected data was subsequently used to calculate the applicable withholding tax on each amount of interest paid to each certified investors at the correct WHT rate - in many cases reduced to up to 0%. Our system then created the WHT reporting in the format that Heritage required to validate its eligibility for a reduced WHT bill for the payment.
Finally, the reported data was presented to the Inland Revenue Service together with the respective WHT amounts with respect to non-eligible/non-certified taxable investors.
As a result of the above process, the issuer’s total gross up WHT bill which was due for payment to the tax agency with respect to the February interest payment was reduced significantly.
Are you (or your clients) a corporate debt issuer with active cross-border issues held by international investors or are you considering accessing foreign debt capital markets? Do you (or your clients) employ the WHT grossing up methodology with respect to payments of interest to investors? Contact Acupay’s Product team to find out more about how our services can aid issuers’ initiatives.