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Court backs Nokian Tyres, throws out case over 90M euros in back taxes

The Administrative Court overturned a previous ruling by tax authorities in a protracted tax dispute with the tyre firm over taxes owed..

Rengas puristimessa Nokian tehtailla.
Compressing a tyre at a Nokian Tyres factory. Image: Jussi Mansikka / Yle

Stock-listed tyre manufacturer Nokian Tyres announced Monday that it had won out over the Finnish Tax Administration in a long-running dispute over taxes owed over its operations in Russia.

An Administrative Court reversed a decision by Vero’s appeal board calling on the firm to pay some 89.2 million euros in back taxes. It also ordered the tax authority to pay the tyre company’s legal expenses to the tune of some 40,000 euros.

Dispute over firm’s operations in Russia

The dispute turns on a tax audit of the company’s operations between 2012 and 2013. The review focused on intercompany transactions between Nokian Tyres and its subsidiaries in Russia between 2007 and 2011.

According to tax officials, Nokian Tyres neglected to pay related taxes accrued as part of its transfer pricing practices. The company declared the finding as unsubstantiated and immediately appealed the ruling.

The firm argued that the decision meant that it would have had to pay taxes on the same revenues in both Russia and Finland.

As a result of the authority’s reassessment, Nokian Tyres ended up paying 89.2 million euros in additional taxes and penalties between 2007 and 2010. In January 2017, the company sought a review of the new assessment in the administrative court.

No jobs lost over tax bill

Nokian Tyres CFO Anne Leskelä described the outcome as welcome and positive in a statement issued Monday.

Leskelä said that it was fortunate that the firm has traditionally has a solid balance sheet, noting that the tax bill had not resulted in any job losses.

“Such large sums levied on a company are very onerous financially, but fortunately we have traditionally had a strong balance sheet.”

The firm said in its statement that it would record the impact of the administrative court decision in adjusted financial statements when the ruling becomes final. The tax administration has 60 days in which to appeal the outcome to the Supreme Administrative Court.

It is still not clear what will happen to the 90 million euros freed up by the court decision.

“The CFO will not decide on that. We have major investments in North America, Russia and Finland,” Leskelä noted.

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