Riggs National Corporation & Subsidiaries, f.k.a. Riggs National Bank and Subsidiaries - Page 9

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               As a result of the historically high inflation in Brazil and           
          the periodic currency devaluations, the National Monetary Council           
          issued Resolution 432, which authorized borrowers of registered             
          foreign currency loans to hedge cruzeiros (intended to be used              
          for payments on the loans) against currency devaluations by                 
          depositing foreign funds at the borrower’s Brazilian bank.                  
          Pursuant to Resolution 432, the borrower would purchase the funds           
          to be deposited at its Brazilian bank at the official exchange              
          rate.  The foreign funds remained on deposit until such time as             
          the borrower was required to make payment to the lender.  The               
          foreign currency deposited at the borrower’s bank was then                  
          transferred to the Central Bank which paid (2 days before the               
          date the borrower was required to make payment to the lender)               
          interest on the deposited funds at a rate equal to that payable             
          by the Brazilian borrower to the foreign lender (as set forth in            
          the Certificate of Registration). To the extent that interest was           
          paid to the foreign lender with funds deposited in the Central              
          Bank, the Brazilian borrower had no obligation to withhold income           
          taxes thereon.                                                              



               5(...continued)                                                        
          cases and they were immune from taxation under the Brazilian                
          Constitution.  The Brazilian Revenue Service specifically                   
          authorized the Central Bank to waive the withholding of tax on              
          remittances abroad made by the Central Bank and/or other                    
          public-sector entities that had assumed the tax burden (i.e.,               
          interest due on net loans).                                                 





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