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Vale Settles Swiss, Brazilian Tax Disputes

by Mike Godfrey, Tax-News.com, Washington

28 December 2012


Vale has confirmed that it has settled two disputes with tax authorities in Switzerland and Brazil in relation to cases dating back as far as 2006, although the payments are significantly higher than the company anticipated in its accounts.

Vale confirmed that it would pay a settlement of CHF212m (USD232m) to Swiss federal authorities in respect of its wholly-owned subsidiary Vale International, based in St. Prex, in the Canton of Vaud. The company explained that the dispute related to a federal tax holiday granted to the subsidiary in 2006, and differences in its interpretation. The company confirmed that it had only made provision for a settlement worth USD37m. Vale stated that payment will be made in instalments, starting in January 2013, with the last one taking place in 2015.

In respect of its Brazilian operations in the Brazilian state of Minas Gerais, Vale has agreed to pay BRL168m (USD82m) in respect of its tax affairs in 2006 and 2007 (far lower than the original assessment of BRL2.1bn) and BRL495m in respect of the tax years 2008-12, with BRL92m payable in 2012, and the remainder to be paid off in instalments over the next couple of years. The case relates to new provincial value-added tax (ICMS) legislation in Minas Gerais, the company said, conceding that the payment agreed is more than four times the figure that it had originally set aside to settle the dispute.

Vale is also embroiled in a tax dispute with federal authorities in Brazil over unpaid taxes worth BRL25bn (USD13.9bn) in respect of its non-Brazilian subsidiaries. The company is challenging the Brazilian tax authority's assessment, alleging that it amounts to double taxation, and has consistently said throughout the long-running spat that it is optimistic of a favorable outcome, based on the outcome of similar cases.

TAGS: compliance | tax | business | sales tax | tax compliance | mining | law | tax authority | Brazil | Switzerland | tax breaks

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