This excerpt taken from the VCP 20-F filed Oct 28, 2009.
Interest attributed to capital
Distribution of a notional interest charge attributed to capital in respect of the preferred or common shares as an alternative form of dividend payment to shareholders or depositary agents who are either Brazilian residents or non-Brazilian residents is subject to Brazilian withholding income tax at the rate of 15% (except for those shareholders or beneficiaries resident in tax havens or low tax jurisdictions -see further discussion below). Such payments, subject to certain limitations, are deductible for Brazilian income tax and for social contribution purposes as long as the payment of a distribution of interest is credited to a shareholders account and approved at our general meeting of shareholders and is calculated by reference to the TJLP interest rate determined by the Central Bank from time to time and cannot exceed the greater of:
* 50% of net income (after the deduction of social contribution on profits and before taking such distribution and the provision for income tax into account) for the period from which the payment is being made; or
* 50% of the sum of retained profits and profit reserves that exist as of the beginning of the period from which the payment is being made.
Current Brazilian corporate law establishes that a notional interest charge attributed to shareholders equity can either be accounted for as part of the mandatory dividend or not. In case the payment of such interest is accounted for as part of the mandatory dividend, we would be required to pay an additional amount to ensure that the net amount received by the shareholders, after the income tax, is at least equal to the mandatory dividend. The distribution of interest attributed to capital would be proposed by our Board of Directors and subject to subsequent declaration by the shareholders at a general meeting.