Current Report No.: 22/2019

Information on the decision of the Head of the Kujawsko-Pomorskie Tax Office in Bydgoszcz

Current Report No.: 22/2019

Date of preparation:

Abbreviated name of the Issuer: CIECH S.A.

Legal basis: Art. 17. 1 of the MAR – inside information

Subject: Information on the decision of the Head of the Kujawsko-Pomorskie Tax Office in Bydgoszcz

Contents of the Report:

The Management Board of CIECH S.A. (the “Company” or “Issuer”) informs that on 6 June 2019, the legal representative of subsidiaries of the Issuer - CIECH Soda Polska S.A., CIECH Cargo sp. z o.o., CIECH Pianki sp. z o.o. (hereinafter jointly the "Subsidiaries") – received the decisions of the Head of the Kujawsko-Pomorskie Tax Office in Bydgoszcz (the "Office” or “Authority") of 23 May 2019, issued following tax proceedings conducted against the Subsidiaries in the scope of an audit of the corporate income tax for 2015.

In the issued decisions, the Office questioned the right of each Subsidiary to settle a tax loss from participation in a partnership, which is an indirect subsidiary of the Issuer (the "Partnership").When taking action contested by the Office, the Subsidiaries used the services of professional advisers.

The Subsidiaries and their advisors disagree with this approach, and therefore, each Subsidiary intends to take procedural steps to defend the tax consequences of its activities in 2015.

The decisions are neither final nor enforceable. If such disadvantageous decisions for the Subsidiaries are maintained in the next stage of administrative proceedings, the Subsidiaries will be forced to pay income tax in the total amount of PLN 8.19 million and additional late payment interest, which as at the date of publication of this report amount to PLN 2.09 million.

At the same time, the Issuer announces that potential tax liabilities due to income tax resulting from the aforementioned decisions and pending tax proceedings in other subsidiaries of the Issuer, with respect to the right to settle losses from participation of the Subsidiaries in the Partnership, amount to a total of approx. PLN 19.6 million, and interest, if any, amounts to approx. PLN 4.7 million. The potential tax liabilities of Issuer's subsidiaries may increase if new tax audits are instituted, as part of which the right to settle a tax loss by subsidiaries of the Issuer from participation in the Partnership in subsequent tax years would be disputed by the competent Tax Office.

The Issuer informed about the pending tax audits and proceedings at the Issuer's subsidiaries in the scope of the audit of corporate income tax in the consolidated statements of the CIECH Group.

The Subsidiaries are analysing the received decisions in terms of the appropriateness of creating a provision for income tax and interest. 

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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