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Fortum To Appeal Swedish Tax Ruling

by Ulrika Lomas,, Brussels

04 May 2016

Finnish clean energy provider Fortum has announced that it intends to appeal certain decisions of the Swedish Administrative Court relating to income tax assessments in Sweden for the years 2009–2012.

While the court ruled partly in the company's favor, Fortum announced on April 29 that it will contest a number of other decisions because it "disagrees with the interpretation of the court."

At the center of the dispute is the interest deductibility of a series of loans between Fortum's Swedish subsidiaries that were created as part of the group's restructuring in 2004-2005. The tax authorities are also seeking additional income tax as a result of the way in which the acquisition of TGC-10 (now OAO Fortum) was financed in 2008. The firm said that the claims are based on the Swedish interest deduction limitation rules that entered into force in 2009.

According to Fortum, while the court considered that there were sound business reasons behind the transactions in question, the company was nevertheless not entitled to deduct the interest payments.

Commenting on the court's decision, Reijo Salo, Fortum's Vice President, Corporate Tax, said the company finds the tax assessments "problematic."

"Fortum restructured its operations and reallocated loans in 2004–2005 to ensure future operations," Salo observed. "These reallocations did not impact Fortum's tax base in Sweden. We find the assessments problematic, as even the rules as such allow interest deduction, the tax authorities interpretation makes the rules unpredictable."

Fortum said that, if the decisions of the administrative court are allowed to stand, the impact on net profit would be SEK1.1bn (USD140m). However, the company has not made any provision in its accounts for the possible charge because it believes its position is sound, "based on existing legal analysis, [the] EU Commission's view, and supporting legal opinions."

In its interim report, released on April 28, Fortum estimates that its effective corporate income tax rate for 2016 will be 19-21 percent.

TAGS: court | tax | business | interest | energy | law | transfer pricing | Finland | Sweden | Tax

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