UPDATE 2-Vale settles Brazil, Swiss tax cases, to take Q4 charge

Wed Dec 19, 2012 2:16pm EST

* Company to take Q4 tax charges of about $448 mln

* Payments to end Swiss, Minas Gerais tax cases

* Vale Swiss tax exemptions renewed through 2015

SAO PAULO/RIO DE JANEIRO, Dec 19 (Reuters) - Brazil's Vale SA, the world's second-largest mining company, settled tax disputes in Switzerland and Brazil and will take charges of about $448 million against earnings in the fourth quarter, the company said in statements on Wednesday.

Vale agreed to pay 212 million Swiss francs ($232 million) to the Swiss federal government, and 663 million reais ($317 million) to the government of Brazil's Minas Gerais state.

Both cases date back to 2006.

Saint-Prex, Switzerland is home to Vale's European business. Vale, the world's largest iron-ore producer, gets about t wo thirds o f its output from Minas Gerais st ate.

The Swiss and Minas Gerais cases are the first of several tax and royalty disputes Vale hopes to resolve in the coming months with Brazilian and foreign governments. The largest case, over whether Vale must pay Brazilian taxes on overseas earnings already taxed by foreign governments, is worth 30 billion reais ($14.6 billion).

That case is being reviewed by Brazil's Supreme Court and Vale has won an injunction against payment until its challenge of the taxes is resolved. Vale considers the Brazilian government's tax claim to be illegal double taxation.

Vale had set aside $37 million for the Swiss claim and 135 million reais ($64 million) for the Minas Gerais dispute, the Rio de Janeiro-based company said. As a result it will take a fourth-quarter charge of $195 million for the Swiss taxes and 528 million reais for the Minas Gerais case.

The actual payments for the Swiss debt will start in January and end in 2015. The Brazilian payments to Minas Gerais will run through 2014.

Swiss Federal and local canton of Vaud tax exemptions were renewed until 2015, provided Vale meets targets for employment, real estate investment and cooperation with Swiss universities, Vale said.

The Minas Gerais case involved a dispute over the calculation of Brazil's ICMS goods and services tax. Under the agreement, Vale accepted the use of t he market value of its iron ore and other products as a basis for the tax rather than the cost of production.

Minas Gerais state agreed to make no additional ICMS claims against Vale for the 2008-2012 period.

Preferred shares of Vale, the company's most widely traded class of stock, fell 1.37 percent to 42.44 reais in late afternoon trading on Sao Paulo's BM&FBovespa exchange. The benchmark Bovespa index of the most traded stocks on the BM&FBovespa rose 0.75 percent

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