Braskem SA (BAK)

(c) Tax on net income (ILL)

Merged company Copesul applied to the Federal Revenue Office for refund of Tax on Net Income (ILL) paid from 1989 through 1991, to be offset against other federal taxes, as this tax was considered unconstitutional under the Federal Senate Resolution 82 of November 22, 1996.

In December 2002, merged company Copesul posted such credits as accumulated profits, as the outside counsel held that likelihood of a favorable outcome is probable, given the existence of the aforesaid Federal Senate Resolution. The 3^rd Chamber of the 1^st Taxpayers Council has already acknowledged Copesul’s entitlement to restitution of unduly paid ILL. A motion for restitution is pending judgment by the Higher Tax Appeals Chamber.

(ii) Tax on net income (ILL)

The Company brought suit for recovery of unduly paid income tax on net income in the 1989 and 1990 tax years. The courts eventually held this case valid in a final and conclusive manner, and the Company asked the Federal Revenue Secretariat (“SRF”) to acknowledge the corresponding credit for further offsetting with other subsequent tax debts. Entitlement to a R$ 45.4 credit was acknowledged in November 2005, which was fully offset with PIS and COFINS debts.

F-33

Table of Contents

Braskem S.A. and its Subsidiaries

Notes to the Consolidated Financial Statements—(Continued)

at December 31, 2005, 2004 and 2003

All amounts in millions of reais, unless otherwise indicated

(iii) Tax on Net Income (ILL)

The Company brought suit for recovery of unduly paid ILL tax in the 1989 and 1990 tax years. The courts eventually held this case valid in a final and conclusive manner, and the Company asked the Federal Revenue Office (SRF) to acknowledge the corresponding credit for further offsetting with other subsequent tax debts. Entitlement to a R$ 45,395 credit was acknowledged in November 2005, which was fully offset with PIS and COFINS debts.