Vale Agrees to Pay $553.1 Million to Settle Two Tax Disputes

Vale SA (VALE5), the world’s largest iron- ore producer, agreed to pay the equivalent of $553.1 million to settle Swiss and Brazilian tax disputes as it seeks to resolve claims that helped drag shares down last year.

Vale will pay 212 million Swiss francs ($232.8 million) in installments starting in January through 2015 to settle a tax claim with Switzerland, the company said in a statement today. Separately, Vale said it will pay 663 million reais ($320.3 million) to terminate a legal dispute with the Brazilian state of Minas Gerais for overdue taxes for the 2006-2012 period.

Vale, based in Rio de Janeiro, is fighting Brazilian federal and local tax claims as governments seek to boost revenue from metals and mineral mining. Brazil is seeking about 30.7 billion reais of taxes on profit from Vale’s foreign units in addition to overdue mining royalties. Concern the payments would cause losses prompted Vale to slump 22 percent in Sao Paulo last year, the worst performance since 2008.

Vale had said fourth-quarter earnings will be curbed by about $451 million after existing provisions, according to Bloomberg’s calculations.

The dispute with Switzerland stems from differences in the interpretation of tax breaks granted to the company in 2006, Vale said a statement before the open of regular trading hours. The tax exemptions were renewed until 2015, it said.

In Minas Gerais, where the government sought 2.1 billion reais in taxes for the 2006-2007 period, Vale agreed to pay 168 million reais to terminate the claims, the company said. The remaining 495 million reais will cover claims for 2008-2012, it said.

Vale slid 1.4 percent to close at 40.41 reais in Sao Paulo, declining for the first time in nine days.

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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