Current Report No.: 24/2019
Date of preparation: 27.06.2019
Abbreviated name of the Issuer: CIECH S.A.
Legal basis: Art. 17 (1) MAR – confidential information
Subject: Creation of provisions for tax and interest obligation and the write-off for deferred tax asset
Contents of the Report:
With reference to the current report No. 22/2019 dated 6 June 2019, CIECH S.A. (the „Company” or the „Issuer”) hereby informs that today, based on its own assessment of the case, adviser’s opinion and the auditor’s approach, it has completed the internal assessment of risks related to the potential:
As a result of such assessment, following the precautionary principle, in accordance with the interpretation 23 of the International Financial Reporting Interpretations Committee, the Company has decided that events which occurred after the balance sheet date (i.e. the decisions of the head of the Tax Office) are a source of additional information of a state of facts existing as at the balance sheet date. In the assessment of the Company the above indicates the necessity of recognising as at 31 December 2018 of provisions for ongoing tax proceedings and the write-off for deferred tax asset in relation to five of the Issuer’s subsidiaries which settled a tax loss from participation in a partnership being the Issuer’s indirect subsidiary (the issued decisions related only to the Subsidiaries). Therefore, the Company has decided on the necessity of correction of already published, but not yet approved, the Consolidated Financial Statements of CIECH Group for the year 2018, the Report of the Management Board on CIECH and CIECH Group activity for the year 2018. The reason for the correction of the documents mentioned in the previous sentence is the decision to create in the consolidated financial statements of CIECH Group for the year 2018 (the “Statements”) a provision for the income tax in the amount of PLN 65 Million and to recognise a provision for late payment interest, which as at the balance sheet date, i.e. as at 31 December 2018, amounted to around PLN 6 Million.
The description of the inspection on the right of five of the Issuer’s subsidiaries to settle a tax loss from participation in a partnership being the Issuer’s indirect subsidiary has been presented in item 9.2 of the Statements and was also presented in the periodic report for the first quarter of the year 2019, as well as in periodic reports published by the Company in previous reporting periods. The amounts of created provisions for income tax and the write-off for deferred tax asset mentioned in this report fall within the amount of PLN 143.8 Million presented in the Statements.
The creation of provision and the write-off for deferred tax asset shall not result in the outflow of financial finds from five of the Issuer’s subsidiaries. If tax authorities of second instance issue disadvantageous decisions against the companies, they shall be obliged to pay amounts with interest determined in such decisions.
At the same time the Issuer would like to emphasise that the Issuer, the Subsidiaries and their advisers do not agree with the approach expressed in the decisions of the tax authority, therefore the Subsidiaries have taken procedural steps aimed at defending tax consequences of their actions taken in 2015 and appealed against the received decisions on 19 June 2019.
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