Fortum has received from the Finnish Tax Administration a non-taxation decision regarding activities in the Belgian and Dutch financing companies. The decision is in line with the Finnish Supreme Administrative Court’s 2014 precedent decision regarding the treatment of hybrid loans (recharacterisation).
The authorities audited Fortum’s financing companies in Belgium and Holland for 2008 – 2011. For these years, Fortum has paid approximately EUR 38 million in taxes to Belgium and EUR 16 million to Holland on interest income in accordance with the local tax regulations.
The audit started in February 2013 as part of the Tax Administration’s transfer pricing project. Fortum has cooperated with the authority especially to clarify the business grounds for the Belgian financing company.
Fortum's Head of Tax, Reijo Salo comments: "For our opinion, it is positive that the Tax Administration's decision aligns with the established legal praxis that was confirmed by the Finnish Supreme Administrative Court’s precedent decision. Taxes are a consequence of business, and therefore we pay tax there, where business is located."
The competitiveness of an international, capital intensive company requires that it can efficiently finance the operations and investments it has in different countries, like new power plant construction projects, while also managing financing risks. The Benelux countries (Belgium, the Netherlands, Luxembourg) have international financing systems that are effective from a corporate finance perspective as well as a predictable and stable operating environment that is compliant with EU regulations.
Fortum is one of the biggest tax payers in Finland. In 2013 Fortum’s total tax rate – taxes in all countries of operation – was 33.8% on pre-tax earnings (EUR 644 million). In Finland, Fortum paid a total of EUR 174 million in taxes and employer contributions.
The Tax Recipients’ Legal Services unit within the tax authorities has the right to appeal the decision.
Further information: Reijo Salo, Head of Tax, tel. +358 50 45 24443
Fortum’s purpose is to create energy that improves life for present and future generations. Catering to the versatile needs of our customers, we generate, distribute and sell electricity and heat, and offer related expert services. Our operations focus on the Nordic and Baltic countries, Russia and Poland. In 2013, Fortum’s sales totalled EUR 6.1 billion and comparable operating profit was EUR 1.6 billion. We employ approximately 8,800 people. Fortum’s shares are traded on the NASDAQ OMX Helsinki. www.fortum.com