- 9 -
foreign currency (which was subject to Brazilian tax) required the
borrower to submit a completed DARF and the tax payment as evidence
that the proper amount of the tax had been paid.7
D. Net Loans and Gross Loans
As previously indicated, phase I DFA, phase I CGA, phase II
DFA, phase II CGA, and phase III DFA loans were net loans.
In making loans to borrowers in Brazil and other countries, it
was an accepted and common practice among foreign lenders to
require that interest payments be made to them on a “net quoted”
basis. A net loan is a loan in which the lender and the borrower
agree that all payments of principal and interest to the lender,
under the loan contract, will be made net of any applicable
Brazilian taxes.
Under Brazilian law, when the Brazilian borrower under a net
loan assumes the burden of withholding tax, the amount of interest
remitted is considered net of tax and an adjustment known as a
7 The borrower would prepare the DARF and deliver a copy
of it, and the registration certificate, to the Brazilian bank
handling the payment of interest through a foreign exchange
contract. The bank would then record the amount of interest and
tax on the certificate of registration and submit the
certificate, exchange contract, and DARF to the Central Bank for
approval. Following approval by the Central Bank, the bank would
remit the interest to the foreign lender and return to the
borrower a stamped copy of the DARF, the certificate of
registration (stamped), and a copy of the exchange contract. The
borrower would send a copy of the DARF to the foreign lender,
which then had proof (the DARF) that the withholding tax had been
paid.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011