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Decree-law 1,351, which was enacted on October 24, 1974,
authorized the National Monetary Council to temporarily reduce the
income tax on interest, commissions, and expenses remitted to
persons residing or domiciled abroad. On the same date that
Decree-law 1,351 was enacted (October 24, 1974), the Central Bank
issued Resolution 305, which temporarily reduced the tax on
interest, commissions, and expenses received on currency loans
registered with the Central Bank from 25 percent to 5 percent.
Decree-law 1,411, enacted July 31, 1975, amended Decree-law
1,351 and allowed the National Monetary Council to: (1) Reduce the
income tax on interest, commissions, and expenses remitted to
persons resident or domiciled abroad, or (2) grant pecuniary
benefits to Brazilian borrowers receiving loans in foreign
currency.
On August 5, 1975, the Central Bank issued Resolution 334,
which revoked Resolution 305, thereby reinstating the 25-percent
withholding tax on interest, commissions, and expenses paid on
currency loans registered with the Central Bank.
G. Mechanics and Amount of the Subsidy/Pecuniary Benefit
On the same day that the 25-percent tax on interest was
reinstated (i.e., August 5, 1975), the Central Bank issued
Resolution 335, which provided that borrowers taking out foreign
loans duly registered with the Central Bank would receive a
pecuniary benefit equal to 85 percent of the tax paid on interest,
commissions, and expenses due on such loans.
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