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Kungsleden updates tax ruling and adjusts estimate
Monday, 25 June 2012
The Stockholm Administrative Court of Appeal has reported a ruling on a
case to which Kungsleden is party. The Court found that Kungsleden is
not to be permitted deductions for the impairment of lagerandelar
(defined in Swedish law as a construction company’s shareholding in a
property management company) in the application of transitional
provisions for the fiscal year 2009. The Administrative Court of Appeal
has, without providing an explanation of its own, upheld the
Administrative Court’s ruling against the company, which was announced
in a press release on 3 February 2012.
Earnings effect
This ruling increases the risk of the definitive ruling of the
proceedings finding against the company, and has prompted Kungsleden to
provision SEK 342 m. Combined with provisioning for tax processes
reported previously, the company’s total provisions amount to SEK 1,305
m. Of these, SEK 325 m was provisioned in 2009, SEK 260 m in the first
quarter of 2012 and SEK 720 m will be charged to the second quarter.
The amounts include interest, as well as potential tax surcharges. If
all cases to which Kungsleden is party are found against Kungsleden,
the Group’s equity would be reduced by SEK 768 m in addition to the
provisioned amount.
Liquidity effect
The raised assessment of income can be offset against existing
deficits, meaning that the liquidity effect will be lower and estimated
at SEK 100 m. This amount includes interest and tax surcharges. If all
cases to which Kungsleden is party are found against Kungsleden, the
total liquidity effect would be unchanged at SEK 1,390 m, of which SEK
340 m refers to cases where provisions have been established (Including
SEK 100 m, which pertains to these proceedings).
New estimate
Given the elevated risk of additional tax to be paid, the estimate for
profit for calculating dividends for the full-year 2012 has been
lowered from SEK 400 m to SEK 300 m.
Kungsleden’s opinion
Kungsleden’s opinion remains that the company has fully complied with
the laws and practice in place when submitting each tax return. In
Kungsleden’s opinion, it is difficult to assess the Administrative
Court of Appeal’s ruling since it has not been provided an explanation
of its own, and thus the company intends to petition for leave to
appeal to the Swedish Supreme Administrative Court to consider this
question of principle.
The timing of the effects depends on when Kungsleden’s tax cases are definitively ruled by the courts.
Based on press release
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