- 9 - In contrast to a net loan, a gross loan is a loan in which there is no contractual agreement between the borrower and foreign lender to pay taxes imposed by the borrower's country. With a gross loan, the Brazilian borrower will deduct withholding taxes that are due from the interest specified under the loan contract and will pay the lender the gross interest net of taxes. From 1970 through 1986, net loans generally were the predominant type of loan extended by foreign lenders to borrowers in Brazil. With a net loan, the foreign lender shifts the risk of any increase in taxes imposed by the borrower's country to the borrower. Correspondingly, in a net loan, the borrower, not the foreign lender, will benefit from any reduction in or waiver of taxes imposed by the borrower's country. F. Institution of the Subsidy/Pecuniary Benefit Under Decree-law 1,215, enacted May 4, 1972, the Brazilian Minister of Finance was given discretion to grant a reimbursement or reduction of, or exemption from, the withholding tax on interest provided: (1) The borrower's costs were reduced; (2) the loan was of national interest, (3) the loan met the minimum repayment term set by the National Monetary Council;3 and (4) the loan complied with other conditions set forth by the Ministry of Finance. 3 The National Monetary Council is a Government agency responsible for economic programs. Its members include the Finance Minister, the Central Bank's President, and representatives of the largest Brazilian commercial banks. The Finance Minister presides over the council's meetings. The council acts through the Central Bank.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011