- 82 -
reasoning because, as petitioner's experts assert, the Brazilian
Supreme Court Justices failed to appreciate that Decree Law 401
applies only to import financing loans, not foreign currency
loans.38 Of significance for our purposes in determining the
applicable Brazilian law is that these Brazilian Supreme Court
decisions, notwithstanding petitioner's experts' criticism of them,
represent the Brazilian Supreme Court's legal position. Over the
years, the Brazilian Supreme Court, in Parana II and other similar
cases involving foreign currency loans, has consistently held that
public-sector entities, like the Central Bank, are immune from
paying withholding tax on their net loan interest remittances
abroad under Article 19 of the Brazilian Constitution.
We do not accept petitioner's contention that Brazilian law
fails to distinguish between net loans and gross loans, in
situations in which the borrower/remitter is a public-sector entity
having an immunity from taxation pursuant to Article 19 of the
Brazilian Constitution. In addition to the expert testimony the
parties have offered and the Brazilian Supreme Court cases
discussed above, other evidence in the record confirms that the
38 We are hesitant to substitute our judgment on a matter
of Brazilian law for that of the Brazilian Supreme Court Justices
who reported these decisions. In any event, this is a matter
which we need not resolve, as in its subsequent decisions (which
petitioners' experts agree involved foreign currency loans) the
Brazilian Supreme Court has continued to utilize and apply Parana
II's net-loan-versus-gross-loan rationale. We further note that
even the Brazilian Government and the Brazilian IRS appear to
have attached little, if any, practical significance to the fact
that the loans made to the Central Bank under the DFA's and CGA's
were currency loans and not import financing loans.
Page: Previous 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 NextLast modified: May 25, 2011