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Also on August 5, 1975, the Central Bank issued Circular 266,
which provided in part:
a. a DARF would be used for the payment of the 25-
percent income tax on interest resulting from foreign
currency loans;
b. on the date of payment, the banking establishment
receiving the payment would, by means of a credit to the
borrower's account, pay the borrower the equivalent of 85
percent of the income tax; and
c. the banking establishment receiving the tax payment
would debit its own account entitled "Pecuniary Benefit-
D.L. 1,411," and would charge the total value of the
pecuniary benefit against the Central Bank.
On July 26, 1979, the pecuniary benefit was reduced to 50
percent of the tax. On December 7, 1979, the pecuniary benefit was
increased to 95 percent of the tax; on May 8, 1980, the pecuniary
benefit was reduced to 40 percent of the tax; and on June 28,
1985,4 the pecuniary benefit was reduced to zero.
H. Resolution 63 Loans
Many Brazilian companies that needed working capital were not
able to provide foreign lenders with adequate financial information
or proper guaranties to obtain a loan. To provide Brazilian
companies with the funds needed for their development, and in
keeping with the Brazilian Government's efforts to develop the
country's economy and generate foreign exchange, the Central Bank
issued Resolution 63 on August 21, 1967. Resolution 63 permitted
certain Brazilian banks to borrow funds from abroad for the
4 The parties have stipulated and agreed to use June 28,
1985, as the date for all purposes relating to the reduction of
the subsidy to zero in this case.
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Last modified: May 25, 2011