Rule Restricts Ability of Brazilian Firms to Get Debt Guarantee Letters

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Brazilian tax attorneys complain that an October tax regulation covering payment guarantees provided for taxpayers has proven to be unworkable in practice. On Oct. 20, the tax department issued ordinance 1378 stating that banks issuing debt guarantee letters to clients with tax debts must establish a two-year term for these letters. Brazilian companies contesting tax charges often provide guarantees that the questioned taxes will be paid should they lose their appeals. Tax attorneys tell BNA that the October rule is preventing banks from agreeing to sign guarantee letters with their clients.