Nokian Tyres plc Stock Exchange Release 7 April 2015 3:15 p.m.
The Board of Adjustment annulled the reassessment decision from the Tax Administration, according to which the Company was obliged to pay EUR 100.3 million additional taxes with punitive tax increases and interests concerning tax years 2007-2010 and returned the matter back to the Tax Administration for reprocessing. According to the Board of Adjustment the Tax Administration neglected the obligation to hear the taxpayer. Because of the procedural fault of the Tax Administration, the Board of Adjustment annulled the decision without considering the actual substance of the matter.
The Large Taxpayers’ Office carried out a transfer pricing tax audit regarding tax years 2007-2011, investigating if the intercompany transactions between Nokian Tyres plc and its subsidiaries were concluded based on market prices. Reassessment decision regarding year 2011 has not been received yet. The Tax Administration states in the reasoning of its decision concerning 2007-2010, that the transfer pricing was market-based with all other but the Russian subsidiaries. According to the Tax Administration the success of Russian business is not based on the modern and efficient production plant in Russia combined with the sales and logistic network covering whole Russia. The Tax Administration considers the Russian plant as a low risk contract manufacturer. The Tax Administration has ruled that a significant part of the Russian subsidiaries' profits should be added to Nokian Tyres’ taxable income in Finland. In practice this leads to double taxation of income, which is contrary to existing tax agreements.
Nokian Tyres plc considers the Tax Administration´s decision unfounded. The Company has consistently applied transfer pricing according to tax laws and OECD guidelines prevailing at the time. The Tax Administration has not presented any appropriate grounds to ignore Company’s transfer pricing documentation. The Tax Administration´s reassessment decision was based on illegitimate reclassification of legal transactions.
The Company left the claim for rectification to the Board of Adjustment 19 February 2014. In addition the Company appealed 20 February 2014 to the Administrative Court to obligate the Tax Administration to present the minutes of the interviews for the Company’s comments. The Administrative court ruled the matter in favor of the Company 3 December 2014.
The Company will return the 2007-2010 total additional taxes of EUR 100.3 million in full to the financial statement and result of first quarter result 2015. The Company had recorded the 2007-2010 total additional taxes of EUR 100.3 million in full to the financial statement and result of year 2013. The Company also expects the Tax Administration to return immediately EUR 43.1 million it has already set off despite the stay of execution.
Nokian Tyres plc Antti-Jussi Tähtinen VP, Marketing and communications
Further information: Mrs. Anne Leskelä, CFO, tel: +358 10 401 7481
Distribution: NASDAQ Helsinki, media, www.nokiantyres.com
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