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Brazil, UBS in dispute over $38 million in back taxes

The logo of Swiss bank UBS is seen at a branch office in the north-eastern Swiss town of St. Gallen July 3, 2013. REUTERS/Arnd Wiegmann
The logo of Swiss bank UBS is seen at a branch office in the north-eastern Swiss town of St. Gallen July 3, 2013. REUTERS/Arnd Wiegmann

SAO PAULO (Reuters) - Brazil's government wants UBS AG to pay 92.3 million reais ($38 million) in back taxes it says it is owed by the Swiss lender's local brokerage unit, the latest attempt by authorities to tighten tax oversight on large companies.

The country's Federal Revenue Service claims Link Corretora, which UBS took over in February, did not pay taxes related to capital gains stemming from the divestment of shares in Bovespa Holding SA, a São Paulo-based spokeswoman for UBS said, adding that the risk of losing the case was "possible."

UBS agreed to pay about 200 million reais for Link at the time the deal was announced in April 2010. Link is Brazil's second largest brokerage in the cash equity trading market. Bovespa merged with a rival in 2008 to create BM&FBovespa SA , the country's largest financial bourse.

Brazil's tax authority, which is renowned for its tough tactics, recently intensified pressure on enterprises ranging from commodity exporters to financial companies that it accuses of tax evasion. The crackdown coincides with eroding revenue levels and higher government spending.

The media office of the Brasilia-based revenue service, known as Receita Federal, declined to comment, saying the process is subject to secrecy rules.

The authority, which in Brazil is nicknamed "The Lion," has also notified Itaú Unibanco Holding SA , Brazil's No. 1 bank by market value, of a potential 18.7 billion reais claim. The bank, which on August 16 said the possibility of a loss is remote, will not make a provision.

Receita Federal has raised similar charges against Banco Santander Brasil SA for its purchase of Banco do Estado de São Paulo SA in the late 1990s, and against BM&FBovespa, for the merger that created it. The dispute is ongoing.

The government has won some cases in which mergers were carried out to generate goodwill, and so to benefit from the tax shield of such goodwill, according to Carlos Macedo, an analyst with Goldman Sachs.

($1 = 2.41 Brazilian reais)

(Reporting by Guillermo Parra-Bernal, editing by G Crosse)

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