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issued debt in the Eurobond market, generally guaranteed by the
U.S. parent corporation, and lent the proceeds to the U.S. parent
or its affiliates. Depending on the facts in a particular case,
the U.S. parent’s payment of interest on its indebtedness to the
Netherlands Antilles finance subsidiary might be exempt from
withholding tax by reason of the application of the U.S.-
Netherlands Income Tax Convention, as extended by protocol to the
Netherlands Antilles.
City’s Finance Subsidiary
In June 1974, City organized a subsidiary in the Netherlands
Antilles named City Investing Finance N.V. (Finance) to
facilitate access to the Eurobond market. At some point, 20
shares of Finance’s common stock at $1,000 par value were issued
to City. City made a payment of $1,000 for 1 share of Finance’s
stock in May 1978; the remaining $19,000 due from City was
treated as a “subscription receivable” on Finance’s financial
statements.
In 1977 and 1979, City undertook to raise approximately $30
million and $50 million, respectively, from sources outside the
United States by having Finance issue notes in these amounts in
the Eurobond market. The payment of principal and interest on
these notes was unconditionally guaranteed by City. Finance
immediately transferred the proceeds from the notes to City, in
exchange for City’s promissory notes. Before issuance of
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Last modified: May 25, 2011