- 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