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3. LIIBV's Tax Status in The Netherlands
LIIBV kept books in The Netherlands in which it recorded its
lending and borrowing transactions, investments, capital
contributions, income, and expenses. LIIBV reported the payments
on its loans to Transit, LWSI, and Tree as interest income
subject to The Netherlands' income tax. LIIBV paid income tax to
The Netherlands in 1986, 1987, and 1988.
LIIBV could claim benefits under the Convention for the
Avoidance of Double Taxation, Apr. 29, 1948, U.S.-Netherlands,
art. VIII(1), 62 Stat. 1778, for all of the interest paid to it
by U.S. persons, including petitioners.
Neither LTL nor any of the other Laidlaw companies asked to
borrow money from any unrelated commercial lenders to replace the
money the Laidlaw companies received from LIIBV. LTL did not
guarantee repayment of loans LIIBV made to petitioners or the
U.S. companies. However, LTL guaranteed repayment of loans by
commercial lenders to petitioners and the U.S. companies.
4. LIIBV Cura�ao
In October 1987, LIIBV established a branch office in
Cura�ao, Netherlands Antilles (LIIBV Cura�ao), to reduce
Netherlands income tax on the interest payments that LIIBV
received from Transit, LWSI, and Tree. LIIBV Cura�ao kept a set
of its books and records in Netherlands Antilles.
On February 17, 1988, LIIBV Cura�ao hired G.A.F. Schrils
(Schrils), a resident of Netherlands Antilles, as its branch
manager. Schrils reported to LIIBV's directors in Amsterdam.
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