Current Report No.: 3/2020

Date of preparation: 07.01.2020

Abbreviated name of the Issuer: CIECH S.A.

Subject: Information on the decision of the Head of the Małopolskie Province Customs and Tax Office in Krakow

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

Report:

The Management Board of CIECH S.A. (hereinafter referred to as the “Issuer” or “CIECH”) herewith informs that on 7 January 2020, the attorney for a subsidiary of the Issuer – CIECH Soda Polska S.A. (hereinafter referred to as the “Subsidiary” or “CSP”), i.e. the legal successor of Cerium Finance Sp. z o.o. (hereinafter referred to as “Cerium Finance”), received the decision of the Head of the Małopolskie Province Customs and Tax Office in Krakow (hereinafter referred to as the “Decision of the 2nd Instance” and the “2nd Instance Authority” respectively) of 24 December 2019. Following an appeal submitted by the Subsidiary, the 2nd Instance Authority upheld the decision of the Head of the Małopolskie Province Customs and Tax Office in Krakow (hereinafter referred to as the “1st Instance Decision”) of 30 August 2019, defining the amount of the tax liability with respect to tax on goods and services for December 2014 in the amount of PLN 25,731,601, of which the amount of the disputed liability arising from the 1st Instance Decision is PLN 25,277,408 (the “Liability”).

The Decision of the 2nd Instance is due and payable, and could make it necessary to pay the amount of the Liability together with interest once again, which as at the date of publication of this report amounts to PLN 10,011,000, although the amount of the Liability has already been paid to the competent tax office in connection with the correction of the VAT settlement for July 2018, submitted in accordance with the received individual interpretation (hereinafter referred to as the “Correction”). Such VAT amount to be paid again will be recovered by the Subsidiary, at the latest, after the end of administrative and court proceedings, if any (for December 2014), or after the end of overpayment proceedings, if any, for July 2018. 

In order to avoid payment of the same amount of the Liability once again, the Subsidiary and its tax advisors are analysing:

1. the possibility of crediting the amount of VAT, paid as a result of the submitted Correction, towards the Liability arising from the Decision of the 2nd Instance and the interest due on such Liability, and
2. the impact of this action on the course of the tax proceedings.

Should the overpayment proceeding prove to be effective, the Subsidiary would be required to additionally pay approx. PLN 7,900,000 in respect of the interest and VAT. 

The Issuer informed about the pending proceedings in its current reports:

1. No. 26/2019 of 17 July 2019
2. No. 39/2019 of 11 September 2019.

Furthermore, the Issuer informed about the pending proceedings and the amount of the potential tax liability in the consolidated statements of the CIECH Group. In the extended consolidated financial statements of the CIECH Group for the three quarters of 2019, these proceedings are described in Note 3.12, in the section “Audits of tax settlements in the CIECH Group”, in the paragraph “VAT audit for December 2014 at Cerium Finance Sp. z o.o.”

The Subsidiary and its advisers disagree with the position of the 2nd Instance Authority; accordingly, the Subsidiary intends to lodge a complaint against the Decision of the 2nd Instance with the Provincial Administrative Court in Krakow. The Subsidiary's position is based, among others, on the fact that the Subsidiary and Cerium Finance obtained tax interpretations issued by the Director of the National Tax Information Office, which they complied with when settling the VAT correction in the month of receipt of the correcting invoice, i.e. July 2018, and not in its settlements for December 2014 as indicated by the 2nd Instance Authority in the Decision of the 2nd Instance Authority.

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).

Signatures of the Company’s representatives:

Dawid Jakubowicz – President of the Management Board 

Mirosław Skowron - Member of the Management Board