The VAT dispute between Telio and the Norwegian tax authorities is finally closed
Telio and the Norwegian tax authorities have finally decided to close the “VAT issue/case”, which has been ongoing since the tax authorities initiated a tax audit in spring 2006. The tax authorities have issued a ruling which comprises the whole period from 2004 until the Norwegian tax authorities introduced VAT on all electronic services on 1 July 2011. According to the ruling, Telio will pay NOK 50 million, including interest, as a complete and final settlement of the VAT issue. Telio has decided not to appeal the ruling which consequently constitutes a complete and final solution to the “VAT issue” as described in the risk section of Telio’s financial reports.
On 23 March 2011, the company received a report from the Norwegian tax authorities, according to which the tax authorities were considering to claim up to an additional NOK 88.8 million in VAT (exclusive of interest) for the financial years 2004-2008. The company has not received any claim for the periods after 2008, but since the company has applied the same practice in the latter years, it was considered likely that the tax authorities would also open a tax audit for the financial years 2009-1H2011. Telio presented detailed information regarding this preliminary tax audit report in the stock exchange notice on 12 April 2011, including an estimate of a maximum potential claim of NOK 195 million (incl. interest, but excluding any potential penalty tax). This claim is now fully resolved.
The tax audit has been mentioned in the risk section of the quarterly and annual reports, and is in substance related to the issues in the “Ecom court case” between Telio and the Norwegian Ministry of Transportation and Communication. Telio won the “Ecom court case” both in Oslo District Court and Borgarting Court of Appeal. The ministry decided not to appeal and the verdict from Borgarting Court of Appeal became final and enforceable. Based on the principle rulings from the “Ecom court case” and the legal and factual information regarding the “VAT issue”, Telio declared that it would uphold its strong arguments and was prepared to take the “VAT issue” to court.
Although the payable amount still is substantial, Telio has decided to accept to pay it based on a pure cost-benefit analysis. Telio is still of the opinion that the Company’s VAT practice has been correct, and that the likelihood of winning a VAT court case is higher than losing. Yet, the Company has weighted its strong legal position against the direct and indirect costs of a prolonged VAT court case, which the Company assumes would go all the way to the Supreme Court. When the VAT issue now is finally closed, Telio removes a major legal and financial uncertainty, and opens up for structural opportunities for the company and its shareholders. All in all, the board of directors believes this solution is in the best interest of the company and its shareholders.
For further information, please contact:
Eirik Lunde, CEO +47 480 96 964