- 34 -
such DARF's continued until about the time the phase II
restructuring agreements between Brazil and its foreign lenders
were entered into in late January 1984.12
During the phase I negotiations, the Brazilians indicated that
they would have the Central Bank issue DARF's to the foreign
lenders on the Central Bank's restructuring debt interest
remittances on some limited basis, but they also indicated that
they needed additional time in which to study and arrange for the
implementation of the Central Bank's payment of such withholding
tax.13 On or about December 28, 1982, the Central Bank requested
a ruling from the Brazilian IRS with respect to its payment of
withholding tax during the relending periods of the proposed phase
I DFA and phase I CGA. The ruling request and the March 1984
12 Alexandre Leite (Leite), the head of Citibank-Brazil's
tax division, testified that he and Citibank had been seeking
DARF's from the Central Bank on 432 program net loan interest
remittances since at least 1979. Leite related that the Central
Bank officials he met with rejected Citibank's request to have
the Central Bank issue such DARF's to it. Following the Central
Bank's issuance of FIRCE 80 in May 1981, Leite had concluded that
Citibank would not be able to persuade the Central Bank to issue
such DARF's, as FIRCE 80 was authorized and sanctioned by SRF
368.
13 The parties disagree over whether the Central Bank was
legally liable for and actually paid withholding tax with respect
to its restructuring debt interest remittances during the
relending periods of the DFA's and CGA's. The terms "payment"
and "withholding tax" are used herein for convenience and are not
intended as ultimate findings or conclusions concerning the
Central Bank's liability for and payment of such withholding tax.
Similarly, the use herein of terms indicating that DARF's or
withholding receipts were issued by the Central Bank to the
foreign lenders should not be construed as our conveying any
legal conclusion concerning the Central Bank's liability for and
payment of such withholding tax.
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