Under what condition is a Chatime developer allowed to make payments with deductions or withholdings?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
5.4 Withholding
- (1) All withholding taxes shall be borne by Developer. That is to say, all payments by Developer must be made without deduction or withholding (including (without limitation) by way of set-off, counterclaim, duty, tax (including goods and services tax, value added tax and other government imposts) or charge) unless Developer is prohibited by law from doing so, in which case Developer must:
- (a) Promptly pay to Franchisor any additional amount necessary to ensure that the net amount received by Franchisor equals the full amount which would have been received by Franchisor if no deduction or withholding had been made;
- (b) Pay to the relevant authority within the period for payment permitted by law the full amount of the deduction or withholding (including the full amount of any deduction or withholding from any additional amount paid under clause 5.4(1)(a));
- (c) Give Franchisor the official receipt from the authority for the amount paid to it within 7 days after Developer receives it; and
- (d) Assist Franchisor with any reasonable requests for information or supporting documents regarding the calculation and/or payment of the amount paid.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a developer is generally required to make all payments without any deductions or withholdings. This includes deductions for set-off, counterclaims, duties, taxes such as goods and services tax or value-added tax, or any other government charges. However, an exception exists if the developer is legally prohibited from making payments without such deductions or withholdings.
In the event that a developer is legally required to make deductions or withholdings, they must take several steps to ensure Chatime receives the full amount due. First, the developer must promptly pay Chatime any additional amount necessary to ensure that the net amount received by Chatime equals the full amount that would have been received if no deduction or withholding had been made. Second, the developer must pay the full amount of the deduction or withholding to the relevant authority within the period permitted by law, including any deduction or withholding from the additional amount paid to Chatime.
Furthermore, the Chatime developer is obligated to provide specific documentation to Chatime. Within 7 days of receiving it, the developer must give Chatime the official receipt from the authority for the amount paid. The developer must also assist Chatime with any reasonable requests for information or supporting documents regarding the calculation and payment of the deducted or withheld amount. This ensures that Chatime can properly account for the payments and comply with its own tax obligations.