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entity, like the Central Bank, on its gross loan interest
remittances abroad, but not on its net loan interest remittances.
He cited as authority for this proposition the Brazilian Supreme
Court's Parana II decision.
Bekin maintained that the Central Bank would not be required
to pay withholding tax on interest from net loans because it would
be granted exemption from payment of withholding tax under Decree-
law 1,215. He believed that Decree-law 1,215 was the authority for
the Brazilian IRS's issuance of SRF 368. However, on cross-
examination, he acknowledged that, in 1983 and 1984, the National
Monetary Council had set a minimum loan term of 10 years in order
to qualify for exemption under Decree-law 1,215, whereas the phase
I and phase II CGA's and DFA's had loan terms of less than 10
years. Both Bekin and Tostes were of the opinion that the
Central Bank would be exempt under Decree-law 4,595 from payment of
withholding tax with respect to its restructuring debt interest
remittances, as the National Treasury, they maintained, would not
have to pay withholding tax to itself if it, instead, had been the
borrower under the DFA's and CGA's. They pointed out that Decree-
law 4,595 provides that the Central Bank is to enjoy the same
privileges and exemptions as the National Treasury. Tostes further
noted that the March 1984 Brazilian IRS ruling issued to the
Central Bank acknowledged that the Central Bank was acting as an
agent for the National Treasury.
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