BRAZIL said that it will not collect withholding taxes on interest that Brazilian companies pay to foreign lenders on certain outstanding loans.
Brazil used not to collect withholding taxes on interest paid on loans with terms of eight years or longer. The law was changed at the end of 1999, and interest is now subject to a 15% withholding tax unless reduced by a tax treaty. Loans that were outstanding at the end of 1999 are “grandfathered” from withholding tax.
The question arises what happens if a grandfathered loan is extended. The banking system in Argentina views such extensions as a new loan. However, Law 10,925 treats the extension as the same loan as long as it complies with terms set by the central bank, including on the interest rate. The law took effect in May. It
codifies an earlier provisional measure.
