Riggs National Corporation & Subsidiaries, f.k.a. Riggs National Bank and Subsidiaries - Page 13

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          period of about 16 or 18 months during which funds could be re-             
          lent to other Brazilian persons and companies (the re-lending               
          period).  Originally, the re-lending period was to end on June              
          30, 1985, but it was extended to March or April 1986.                       
               On or about December 28, 1982, the head of the Central                 
          Bank’s Department of Foreign Capital Fiscalization and                      
          Registration (FIRCE) submitted a “consulta” or ruling request to            
          the BRS.  FIRCE sought a ruling regarding the Central Bank’s                
          obligation to pay withholding taxes on interest paid on the                 
          restructuring loans and its right to the attendant                          
          subsidy/pecuniary benefit.  In reviewing the ruling request, the            
          BRS formulated a theory that the Central Bank was required to pay           
          withholding tax on its restructuring debt interest remittances              
          during the re-lending periods because, until the expiration of              
          the applicable re-lending period, the loan funds were not                   
          irrevocably committed to the Central Bank, and it, therefore, had           
          to pay withholding tax on behalf of future, unidentified                    
          “borrowers-to-be” (the borrowers-to-be theory).  The BRS                    
          incorporated this borrowers-to-be theory into its draft ruling,             
          which ultimately became the final version of the ruling the BRS             
          issued to the Central Bank in March 1984.                                   
               By letter dated March 14, 1984, the Brazilian Finance                  
          Minister forwarded the ruling by the BRS and his decision on the            
          ruling to the Central Bank’s president.                                     






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