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This excerpt taken from the PBR 20-F filed May 22, 2009. Taxation of Gains
For purposes of Brazilian taxation, there are two types of
non-Brazilian holders of ADSs or preferred or common shares:
(i) non-Brazilian holders that are not resident or
domiciled in a tax haven jurisdiction, and that, in the case of
holders of preferred or common shares, are registered before the
Central Bank of Brazil and the CVM to invest in Brazil in
accordance with Resolution No. 2,689; and (ii) other
non-Brazilian holders, which include any and all non-residents
of Brazil who invest in equity securities of Brazilian companies
through any other means (including under Law No. 4,131 of
1962) and all types of investors that are located in tax
haven jurisdictions. The investors identified in clause (i)
above are subject to favorable tax treatment in Brazil, as
described below. See “—Beneficiaries Residing or
Domiciled in Tax Havens or Low Tax Jurisdictions.”
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 ADSs 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.
The deposit of preferred or common shares in exchange for ADSs
may be subject to Brazilian capital gains at the rate of 15% if
the amount previously registered with the Central Bank of Brazil
as a foreign investment in the preferred or common shares is
lower than:
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Non-Brazilian holders are not subject to tax in Brazil on gains
realized on sales of preferred or common shares that occur
abroad to non-Brazilian holders.
Non-Brazilian holders which are not located in a tax haven
jurisdiction are subject to income tax imposed at a rate of 15%
on gains realized on sales or exchanges of the preferred or
common shares that occur in Brazil or with a resident of Brazil,
other than in connection with transactions on the Brazilian
stock, future or commodities exchanges. With respect to proceeds
of a redemption or of a liquidating distribution with respect to
the preferred or common shares, the difference between the
amount effectively received by the shareholder and the amount of
foreign currency registered with the Central Bank of Brazil,
accounted for in reais at the commercial market rate on
the date of the redemption or liquidating distribution, will be
also subject to income tax at a rate of 15% given that such
transactions are treated as a sale or exchange not carried out
on the Brazilian stock, future and commodities exchanges.
Gains realized arising from transactions on the Brazilian stock,
future or commodities exchanges by an investor registered under
Resolution No. 2,689 who is not located in a tax haven
jurisdiction are exempt from Brazilian income tax. Otherwise,
gains realized on transactions related to the Brazilian stock,
future or commodities exchanges are subject to income tax at a
rate of 20%.
Therefore, non-Brazilian holders are subject to income tax
imposed at a rate of 20% on gains realized on sales or exchanges
of preferred or common shares that occur on the stock exchange
unless such a sale is made by a non-Brazilian holder who is not
resident in a tax haven jurisdiction and:
In these two cases, the transaction will not be subject to
taxation in Brazil. The “gain realized” is for tax
purposes the difference between the amount in reais
realized on the sale or exchange and the acquisition cost
measured in reais, without any adjustment to account for
inflation of the shares sold. The “gain realized” as a
result of a transaction that occurs other than on the stock
exchange will be the positive difference between the amount
realized on the sale or exchange and the acquisition cost of the
preferred or common shares, both such values to be taken into
account in reais. There are reasonable grounds, however,
to hold that the “gain realized” should be calculated
based on the foreign currency amount registered with the Central
Bank of Brazil, such foreign currency amount to be translated
into reais at the commercial market rate on the date of
such sale or exchange.
Any exercise of preemptive rights relating to the preferred or
common shares will not be subject to Brazilian taxation. Any
gain on the sale or assignment of preemptive rights relating to
the preferred or common shares by the depositary on
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behalf of holders of the ADSs will be subject to Brazilian
income taxation according to the same rules applicable to the
sale or disposition of preferred or common shares, unless such
sale or assignment is performed on the stock exchange by an
investor under Resolution No. 2,689 who is not resident in
a tax haven jurisdiction, in which case the gains are exempt
from income tax.
There is no assurance that the current preferential treatment
for holders of the ADSs and some non-Brazilian holders of the
preferred or common shares under Resolution No. 2,689 will
continue in the future.
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