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This excerpt taken from the PBR 20-F filed May 22, 2009. Taxation of
Distributions
A U.S. holder will recognize ordinary dividend income for
U.S. federal income tax purposes in an amount equal to the
amount of any cash and the value of any property we distribute
as a dividend to the extent that such distribution is paid out
of our current or accumulated earnings and profits, as
determined for U.S. federal income tax purposes, when such
distribution is received by the custodian, or by the
U.S. holder in the case of a holder of common or preferred
shares. The amount of any distribution will include the amount
of Brazilian tax withheld on the amount distributed, and the
amount of a distribution paid in reais will be measured
by reference to the exchange rate for converting reais
into U.S. dollars in effect on the date the
distribution is received by the custodian, or by a
U.S. holder in the case of a holder of common or preferred
shares. If the custodian, or U.S. holder in the case of a
holder of common or preferred shares, does not convert such
reais into U.S. dollars on the date it receives
them, it is possible that the U.S. holder will recognize
foreign currency loss or gain, which would be ordinary loss or
gain, when the reais are converted into
U.S. dollars. Dividends paid by us will not be eligible for
the dividends received deduction allowed to corporations under
the Code.
Subject to certain exceptions for short-term and hedged
positions, the U.S. dollar amount of dividends received by
an individual prior to January 1, 2011, with respect to the
ADSs will be subject to taxation at a maximum rate of 15% if the
dividends are “qualified dividends.” Dividends paid on
the ADSs will be treated as qualified dividends if (i) the
ADSs are readily tradable on an established securities market in
the United States and (ii) the Company was not, in the
year prior to the year in which the dividend was paid, and is
not, in the year in which the dividend is paid, a “passive
foreign investment company” as defined for
U.S. federal income tax purposes (PFIC). The ADSs are
listed on the New York Stock Exchange, and will qualify as
readily tradable on an established securities market in the
United States so long as they are so listed. Based on the
Company’s audited financial statements and relevant market
and shareholder
data, the Company believes that it was not treated as a PFIC for
U.S. federal income tax purposes with respect to its 2007
or 2008 taxable years. In addition, based on the Company’s
audited financial statements and its current expectations
regarding the value and nature of its assets, the sources and
nature of its income, and relevant market and shareholder data,
the Company does not anticipate becoming a PFIC for its 2009
taxable year. Based on existing guidance, it is not clear
whether dividends received with respect to the shares will be
treated as qualified dividends, because the shares are not
themselves listed on a U.S. exchange. In addition, the
U.S. Treasury has announced its intention to promulgate
rules pursuant to which holders of ADSs and intermediaries
through whom such securities are held will be permitted to rely
on certifications from issuers to treat dividends as qualified
for tax reporting purposes. Because such procedures have not yet
been issued, it is not clear whether the Company will be able to
comply with the procedures.
Distributions out of earnings and profits with respect to the
shares or ADSs generally will be treated as dividend income from
sources outside of the United States and generally will be
treated as “passive category income” for foreign tax
credit purposes. Subject to certain limitations, Brazilian
income tax withheld in connection with any distribution with
respect to the shares or ADSs may be claimed as a credit against
the U.S. federal income tax liability of a U.S. holder
if such U.S. holder elects for that year to credit all
foreign income taxes. Alternatively, such Brazilian withholding
tax may be taken as a deduction against taxable income. Foreign
tax credits may not be allowed for withholding taxes imposed in
respect of certain short-term or hedged positions in securities
or in respect of arrangements in which a U.S. holder’s
expected economic profit is insubstantial. U.S. holders
should consult their own tax advisors concerning the
implications of these rules in light of their particular
circumstances.
Holders of ADSs that are foreign corporations or nonresident
alien individuals
(non-U.S. holders)
generally will not be subject to U.S. federal income tax or
withholding tax on distributions with respect to shares or ADSs
that are treated as dividend income for U.S. federal income
tax purposes unless such dividends are
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effectively connected with the conduct by the holder of a trade
or business in the United States.
Holders of shares and ADSs should consult their own tax advisers
regarding the availability of the reduced dividend tax rate in
the light of the considerations discussed above and their own
particular circumstances.
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