By Brazil Stock Guide – Samarco Mineração S.A. and shareholder Vale S.A. (B3: VALE3; NYSE: VALE) have been ordered to pay more than R$1.8 billion (US$320 million) in taxes and penalties after Brazil’s Administrative Council of Tax Appeals (Carf) sided with the Office of the Attorney General of the National Treasury (PGFN). The ruling rejects the companies’ attempt to deduct environmental recovery and fine payments from corporate income tax (IRPJ) and social contribution (CSLL) between 2016 and 2019 — expenses tied to the 2015 collapse of the Fundão tailings dam in Mariana, Minas Gerais.
Carf Rejects “Fiscal Benefit” for Penalties
The PGFN argued that allowing such deductions would distort the tax system by turning penalties into operational costs. “The state would be encouraging unlawful behavior,” said PGFN attorney Vinícius Campos during the hearing, according to Agência Brasil. Carf agreed, ruling that the expenses do not meet the legal criteria of necessity, normality, and usualness under Brazil’s tax code.
Samarco contended that the amounts were related to court-approved agreements — notably the TTAC (Conduct Adjustment and Settlement Term), which created the Renova Foundation to manage reparations — and should be considered part of its normal business risks. Vale, as a shareholder and subsidiary guarantor, sought similar deductions but was also denied.
Renova Foundation at the Center of the Dispute
Established in 2016, the Renova Foundation was tasked with managing environmental and social reparations funded by the two miners. However, Carf ruled that these transfers are not directly linked to productive activity and cannot be treated as deductible business expenses.
In a statement, Samarco said it “strictly complies with the New Doce River Agreement” and will continue to discuss the matter in ongoing legal proceedings, reaffirming its “commitment to full reparation.” The ruling can still be appealed.
Why It Matters
The decision carries both financial and symbolic weight. It reinforces that environmental penalties cannot be converted into tax benefits and sets a precedent for other Brazilian companies facing environmental liabilities. It also underscores the PGFN’s push to prevent what it calls the “socialization of business risk” — when corporate misconduct shifts costs to society.
The Fundão dam collapse on November 5, 2015, killed 19 people and sent a wave of mining waste over 600 kilometers (370 miles) down the Doce River to the Atlantic, marking Brazil’s worst-ever environmental disaster. Nearly a decade later, the financial and legal aftershocks continue — now extending into the country’s tax system.
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