Riggs National Corporation & Subsidiaries (f.k.a. Riggs National Bank and Subsidiaries) - Page 18

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               Article 128 of the National Tax Code provides that the                 
          liability for a tax claim may be assigned to a third party who is           
          related to the taxable event which gives rise to the tax                    
          obligation.                                                                 
               Since 1943, Brazilian Federal legislation generally has                
          provided for withholding tax imposed on interest paid by Brazilian          
          borrowers to foreign entities, at the following rates:                      
                              Rate       Years                                        
                              10%      1944-47                                        
                              15       1948-54                                        
                              20       1955-58                                        
                              25       1959-74                                        
                              5       1974-75                                         
                              25       1975-Present                                   
               Article 11 of Decree-law 401,6 which was enacted on December           
          30, 1968, provides as follows:                                              
                    Subject to the deduction of the Income Tax at source              
               is the value of interest remitted to a foreign country,                
               payable by virtue of purchase of goods on installment,                 
               even when the beneficiary of the revenue is the actual                 
               seller.                                                                


          6         Prior to Decree-law 401, the Brazilian Supreme Court,             
          in several decisions, held that remitted interest with respect to           
          goods purchased abroad on an installment basis could not be                 
          taxed, because the interest was part of the purchase price and              
          had been earned abroad.  Decree-law 401 was passed to clarify               
          that generally such interest was taxable under Brazilian law.               
          Its provision in Article 11 that the taxable event was the                  
          remittance of the interest and the borrower was the contribuente,           
          generated considerable controversy, because that provision seemed           
          contrary to the normal rules of Brazilian tax law.  In a June 14,           
          1972, decision, however, the Brazilian Supreme Court upheld the             
          validity of Decree-law 401.                                                 





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