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This excerpt taken from the PBR 20-F filed May 22, 2009. Brazilian
Taxation
The following discussion is a summary of the Brazilian tax
considerations relating to an investment in the notes by a
non-resident of Brazil. The discussion is based on the tax laws
of Brazil as in effect on the date hereof and is subject to any
change in Brazilian law that may come into effect after such
date. The information set forth below is intended to be a
general discussion only and does not address all possible
consequences relating to an investment in the notes.
INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO THE
CONSEQUENCES OF PURCHASING THE NOTES, INCLUDING, WITHOUT
LIMITATION, THE CONSEQUENCES OF THE RECEIPT OF INTEREST AND THE
SALE, REDEMPTION OR REPAYMENT OF THE NOTES OR
COUPONS.
Generally, an individual, entity, trust or organization
domiciled for tax purposes outside
Brazil (a “Non-resident”) is taxed in Brazil only when
income is derived from Brazilian sources. Therefore, any gains
or income paid by PifCo in respect of the notes issued by it in
favor of Non-resident noteholders are not subject to Brazilian
taxes.
Interest (including original issuer discount, or OID, fees,
commissions, expenses and any other income payable by a
Brazilian resident to a non-resident) is generally subject to
income tax withheld at source. Currently, the rate of
withholding tax is 15% or such other lower rate as provided for
in an applicable tax treaty between Brazil and another country.
If the recipient of the payment is domiciled in a tax haven
jurisdiction, as defined by Brazilian tax regulations, the rate
will be 25%.
If the payments with respect to the notes are made by a
Brazilian source, the noteholders will be indemnified so that,
after payment of all applicable Brazilian taxes collectable by
withholding, deduction or otherwise, with respect to principal,
interest (including the OID) and additional amounts payable with
respect to the notes (plus any interest and penalties thereon),
a noteholder will retain an amount equal to the amounts that
such noteholder would have retained had no such Brazilian taxes
(plus interest and penalties thereon) been payable. The
Brazilian obligor will, subject to certain exceptions, pay
additional amounts in respect of such withholding or deduction
so that the holder receives the net amount due.
According to Law no. 10,833, dated December 29, 2003,
capital gains realized on the disposition of tangible assets
located in Brazil, by non-Brazilian residents, whether or not to
other non-residents and whether made outside or within Brazil,
are subject to taxation in Brazil at a rate of 15% (a rate of
25% is applicable if realized by investors resident in a tax
haven jurisdiction, i.e. a country that does not impose any
income tax or that imposes tax at a maximum rate of less than
20%). We understand the notes do not fall within the definition
of tangible assets located in Brazil for the purposes of this
law, but there is still no pronunciation from tax authorities
nor judicial court rulings in this respect. Therefore, we are
unable to predict whether such understanding will prevail in the
courts of Brazil.
Generally, there are no inheritance, gift, succession, stamp, or
other similar taxes in Brazil
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with respect to the ownership, transfer, assignment or any other
disposition of the notes by a Non-resident, except for gift and
inheritance taxes imposed by some Brazilian states on gifts or
bequests by individuals or entities not domiciled or residing in
Brazil to individuals or entities not domiciled or residing
within such states.
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