Administrative Court dismisses Paroc Oy Ab's appeal concerning taxes imposed related to transfer pricing

15 Feb 2017
The Administrative Court of Helsinki has dismissed Paroc Oy Ab’s appeal in the tax dispute between the company and Finnish tax authorities. The Large Taxpayers' Office had ordered Paroc Oy Ab to pay a total of €23.2 million in back taxes for the period of 2006 – 2008.  However, the company considers the tax assessment to be unfounded and will next appeal the decision at the Supreme Administrative Court.

In 2012 and 2013 the Large Taxpayers' Office issued tax assessment decisions, based on a re-assessment of Paroc Group's business model. Paroc Oy Ab would have to pay €14.1 million in taxes, €9.1million penalty charges and interest for the period of 2006-2008.

On 17 June 2014 the Board of Adjustment rejected Paroc Oy Ab’s appeal. The company appealed the rejection decision of the Board of Adjustment to the Administrative Court of Helsinki in August of the same year. The Administrative Court of Helsinki affirmed the back tax assessment decision of the Finnish Tax Administration on 14 February 2017.

The decision of the Administrative Court of Helsinki does not reflect the view of the management and the company will apply for leave to appeal to the Supreme Administrative Court. The position of the management of the Group is that all instructions related to transfer pricing have been complied with. The opinion of a legal expert representing a third party supports the strong view held by the management of the Group.

If the tax assessment becomes final, the company will launch a MAP (Mutual Agreement Process), which is a mutual agreement procedure between the competent authorities of two or more states with a tax treaty, as a result of which double taxation is eliminated. The unrecoverable amount of penalty charges and interest would be €9.1 million.

Paroc has a comfortable liquidity position with €59.5 million of cash on balance sheet at year end 2016.  Also the RCF of €80 million was undrawn.

Subsequent years

The company has followed the same procedure with regard to transfer pricing from 2006 to 2015.  The management of the Group believes that all instructions related to transfer pricing have been complied with, also for these years.

For more information:

Kari Lehtinen, CEO, Paroc Group Oy, tel. +358 46 876 8904
Anders Dahlblom, CFO, Paroc Group Oy, tel. +358 400 815427