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* Top court bars taxing foreign profit of some subsidiaries
* Taxation still applies to Brazilian units based in tax havens
* Vale calls partial decision 'victory' but stock falls 3.5 pct
By Anthony Boadle and Jeb Blount
BRASILIA/RIO DE JANEIRO, April 10 (Reuters) - Brazil's Supreme Court on Wednesday declared a partial end to double taxation of foreign units of Brazilian companies in a split decision that global miner Vale called a "victory" in its $15 billion tax dispute with the Brazilian government.
Vale's most-traded shares fell 3.5 percent as investors strove to interpret the court's complex rulings, as other companies in the world's seventh-largest economy expand abroad.
The world's No. 2 mining company and largest iron ore producer said the ruling will partly reduce its tax liability and leaves open the door to win relief on the rest.
"This was a great victory," Clovis Torres, Vale's general counsel told reporters and investors on a conference call. "It will reduce our liabilities significantly."
Vale has been facing about 30 billion reais ($15 billion) in back taxes on profits by foreign units that the company says were improperly double taxed. The bill is 15 percent larger than Vale's average annual profit for the last three years.
Wednesday's rulings, however, only apply to tax judgments against Vale in 1996 to 2001, just six of the 17 years under discussion in the case, a time when Vale had yet to become one of the world's largest and most global mining companies.
At the end of Wednesday's session, the court left most of the tax issue facing Vale and other Brazilian multinationals undecided. Vale is responsible for the bulk of such tax rulings.
As Brazilian companies expand abroad, the partial tax ruling is likely to cast doubt over the future of rapidly globalizing companies such as steelmakers Cia Siderugica Nacional and Gerdau SA, petrochemical group Braskem SA , meatpackers Brazil Foods SA and JBS SA , construction group Odebrecht SA and aircraft maker Embraer SA.
The supreme court challenge stems from a 2001 decision by Brazil's tax authorities to change the way they determine taxable income from foreign units. At the time, the expansion of Brazilian companies abroad led to concerns that they would use foreign units to evade Brazilian taxes needed to fund the country's schools, health care, roads and other infrastructure.
The court on Wednesday said that any tax judgments based on the 2001 rule change cannot apply to anything before that ruling, Vale's Torres said.
The case is also based on how to apply the 2001 rules to two types of subsidiaries. Generally accepted accounting rules treat foreign subsidiaries in which a Brazilian company has clear voting control differently than those where Brazilians only own a minority, but influential stake.
Taxation on the affiliated companies is harder to determine because the Brazilian company, while it doesn't control the subsidiary, has influence on how investments are made and profits are paid out as dividends, the government argues.
Six of the court's 11 justices said Brazil's 2001 rules for taxing foreign affiliated companies are unconstitutional, as long as the foreign unit was based outside a tax haven.
The issue of whether Brazil's tax rules for controlled subsidiaries not based in tax havens or affiliated companies in tax havens are constitutional was left undecided.
The court declined to rule if Brazil's tax rules violate double taxation treaties designed to prevent two countries from taxing the same profit. They returned that issue to lower courts to reconsider in the light of their other rulings.
Brazil's Central Bank maintains a list of countries and overseas jurisdictions it considers tax havens, or places where accounting and other rules allow companies to evade taxation.
The country's main business lobby CNI, which led the constitutional challenge, called the ruling a "partial victory."
"Even though we didn't win the constitutional issue completely, the ruling was not totally negative, because the important points that we did not win have not been decided definitively," said Cassio Borges, the CNI's legal director.
And, because the court upheld an injunction allowing Vale to withhold any payments until the case is fully solved, Vale has no immediate payment to make.
"Now we will only know how much we have to pay the tax authorities after the end of the judgment," Vale's Torres said.
Before Vale declared victory, the company's shares fell as investors bet otherwise. Vale preferred shares, the company's most-traded class of stock, fell 3.5 percent in late trading in Sao Paulo. Its common shares fell 3.3 percent.
"It's still very confusing. The market is still trying to figure it out, but most are seeing this as negative for Vale, that they lost," said Douglas Pinto, a trader with BGC Liquidez, a Sao Paulo brokerage.