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Brazilian Court Dismisses Vale's Tax Appeal

by Mike Godfrey, Tax-News.com, Washington

05 December 2011


The world's second largest mining company, Vale has been unsuccessful in appealing back taxes said to be due on its foreign-sourced income.

The company's argument, that the taxation of its foreign-sourced income amounts to double taxation and therefore contravenes Brazil's constitution, was dismissed by the 2nd Federal Regional Tribunal, upholding a previous ruling that the overseas operations income of Brazil-based multinationals should be taxed in Brazil even if such income is also taxed in another country.

The case relates to back taxes worth around BRL25bn (USD13.9bn), which the Brazilian authorities have been pursuing for almost a decade.

Vale has announced its intention to challenge the Tribunal's decision at the Superior Court of Justice, and subsequently the Supreme Court of Justice if warranted. As well as pursuing whether the ruling contravenes the nation's constitution, Vale is to also question the scope of the definition of 'foreign profits' for the purposes of the ruling.

"The matter of foreign profits has not been defined yet and it will still be subject of appeal to the Superior Court of Justice and to the Supreme Court of Justice," the company said in a statement.

Vale added that it had recently obtained "favourable decisions" from the authorities on tax administrative matters and that is expects the latest ruling to have "no immediate economic and financial impact" on the company.

TAGS: court | compliance | tax | tax compliance | mining | law | corporation tax | group taxation | multinationals | controlled foreign corporations (CFC) | Brazil

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