Under what condition is a Chatime franchisee allowed to make deductions or withholdings from payments to the franchisor?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
6.7 Withholding
- (1) All withholding taxes shall be borne by Franchisee. That is to say, all payments by Franchisee 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 Franchisee is prohibited by law from doing so, in which case Franchisee 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 6.7(1)(a));
- (c) Give Franchisor the official receipt from the authority for the amount paid to it within 7 days after Franchisee 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 franchisee is generally required to make all payments to Chatime without any deductions or withholdings. This includes set-offs, counterclaims, duties, taxes like goods and services tax or value-added tax, or any other government charges.
However, an exception exists if the franchisee is legally prohibited from making payments without such deductions or withholdings. In this case, the franchisee must take specific actions to ensure Chatime receives the full amount it would have received if no deduction or withholding had been necessary.
Specifically, the franchisee must promptly pay Chatime any additional amount to offset the deduction or withholding, ensuring Chatime receives the full intended payment. The franchisee must also remit the full amount of the deduction or withholding to the relevant authority within the legally required timeframe, including any deduction or withholding from the additional amount paid to Chatime. Furthermore, the franchisee must provide Chatime with the official receipt from the authority within 7 days of receiving it and assist Chatime with any reasonable requests for information or supporting documents related to the calculation and payment of the deducted amount.