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On brief, petitioner argues that the Brazilian Supreme Court
decisions, like the Parana II decision, which hold that public-
sector entities are not required to pay withholding tax on their
net loan interest remittances abroad, are distinguishable.
Petitioner maintains that these Brazilian Supreme Court decisions
involved financing of imported goods covered under Decree-law 401,
not foreign currency loans. Thus, it contends that these Supreme
Court decisions are not applicable to the Central Bank's
restructuring debt interest remittances, because the DFA and CGA
loans to the Central Bank were foreign currency loans. However,
some of petitioner's own experts agreed that the loans involved in
these Brazilian Supreme Court cases were foreign currency loans.
One of petitioner's experts further acknowledged that several of
these cases involved repass loans under Resolution 63. See infra
note 36. Indeed, in the Minas Gerais decision, the reporting
34(...continued)
loan interest remittances and net loan interest remittances by
the immune or exempt entities. However, the most recent of these
rulings, CST Normative Opinion No. 193/74, which was issued on
Oct. 25, 1974, dealt specifically with net loan interest
remittances of tax-exempt foundations. This ruling noted that
these foundations are generally subject to the same tax law rules
as other private entities, except that certain legislation
exempts them from income tax if prescribed requirements are met.
It held that, notwithstanding their exemption from income tax,
the foundations were still required to pay withholding taxes,
even where they have contractually assumed the tax burden. This
last ruling deals with foundations that are exempt pursuant to a
provision of ordinary law and not with public-sector entities
that are immune from taxation pursuant to Article 19 of the
Brazilian Constitution. In the case of a foundation with an
ordinary law exemption from income tax, Articles 9 and 123 of the
National Tax Code may well apply to override the foundation's
ordinary law exemption.
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