Current Report No.: 17/2019

Report as part of pending tax proceedings

Current Report No.: 17/2019

Date of preparation:

Abbreviated name of the Issuer: CIECH S.A.

Legal basis: Art. 17.1 of the MAR – inside information

Subject: Report as part of pending tax proceedings

Text of the Report:

The Management Board of CIECH S.A. (hereinafter referred to as “CIECH” or the “Issuer”) herewith informs that on 22 May 2019, the authorised representative of Verbis ETA sp. z o.o. S.K.A. (hereinafter referred to as the “Subsidiary”), received a bookkeeping audit report in connection with the tax audit proceedings conducted against the Subsidiary by the Małopolskie Province Customs and Tax Office in Krakow (hereinafter referred to as the “Authority”) in respect of its VAT settlements for the fourth quarter of 2013 (the “Proceedings”). The Authority challenged the right to deduct VAT from a part of the non-cash contribution (the "Non-Cash Contribution") made by CIECH to the reserve capital of the Subsidiary. In the opinion of the Authority, the taxable amount of the Non-Cash Contribution is the amount equal to the nominal value of the Subsidiary’s Shares acquired by CIECH, contrary to the tax interpretation issued to CIECH by the Director of the National Tax Information. 

The Subsidiary and its advisers disagree with the position of the Authority. If this position, unfavourable to the Subsidiary, is upheld in the course of Proceedings, and in the court and administrative proceedings, if any, the consolidated result of the CIECH Group will be affected by the following amounts: PLN 30,775,121.95 (thirty million seven hundred and seventy-five thousand one hundred and twenty-one 95/100 zlotys) due to VAT and interest which – as of today – amount to PLN 13,520,818.00 (thirteen million five hundred and twenty thousand eight hundred and eighteen 00/100 zlotys). Due to the fact that the entire VAT amount was paid to the competent tax office, given the current circumstances and facts – the consolidated cash flows of the CIECH Group could be affected by the payment of the aforementioned interest. 

CIECH provided information on the Proceedings in the consolidated statements of the CIECH Group. 

Legal basis: Article 17.1 of the Regulation of the European Parliament and of the Council (EU) No. 596/2014 of 16 April 2014 on Market Abuse (the Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (Official Journal of the European Union L No. 173, p. 1) (the “MAR”).

Signatures of the persons representing the Company:

Dawid Jakubowicz – President of the Management Board

Artur Osuchowski – Member of the Management Board

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