This is a sample Tax Indemnity Agreement. Indemnification, also referred to as indemnity, is an undertaking by one party (the indemnifying party)Â to compensate the other party (the indemnified party) for certain costs and expenses, typically stemming from third-party claims. Tax indemnifications are contractual arrangements established between two parties. Income tax indemnifications can arise from a number of circumstances, including business combinations, spin-offs and IPOs. The form may be customized to suit your needs.