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Central Bank had paid on behalf of an entire group of foreign
lenders subject to a particular withholding tax rate (i.e., a
12.5-percent withholding tax rate, a 15-percent withholding tax
rate, or a 25-percent withholding tax rate).
The Central Bank sent to Morgan Bank (which served as the
agent bank of foreign lenders that included petitioner) group
DARFs reporting the aggregate withholding tax the Central Bank
had paid on behalf of that group of lenders. The Central Bank
enclosed with the DARFs supporting schedules setting forth with
respect to each foreign lender: (1) The net interest remitted,
(2) the grossed-up interest; (3) the withholding tax imposed, (4)
the 40-percent pecuniary benefit the Central Bank received, and
(5) the “60-percent balance of actual withholding tax paid”.
Notwithstanding that on June 28, 1985, the pecuniary benefit had
been reduced to zero, the Central Bank continued to report to the
foreign lenders that it received a pecuniary benefit equal to 40
percent of the withholding tax imposed on its post-June 28, 1985,
interest remittances to them.
The supporting schedules reported that the Central Bank
withheld and paid Brazilian income taxes of $166,415 for 1984 and
$181,272 for 1985 in connection with debt interest remittances to
petitioner. The supporting schedules reported that the Central
Bank received pecuniary benefits of $66,566 for 1984 and $72,509
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