The national taxation authority has finalised an audit covering several years of the operations of tyre manufacturer Nokian Tyres. The decision to hit the company with a bill for over a hundred million euros in back taxes relates to income generated by the company’s Russian subsidiaries. The sum includes tens of millions of euros in tax increases and interest payments.
Nokian Tyres is now 100.3 million euros in the red with the Finnish taxman, according to 2013 book keeping and financial results. The Tax Authority’s decision won’t affect the company’s intentions to pay a dividend to its shareholders, according to the tyre maker’s top brass.
The company intends to contest the tax demand, if necessary, at the Administrative Court.
When the news broke, it bumped the tyre manufacturer’s share price down by around four percent on the Helsinki Stock Exchange.
Stricter position on income abroad
The Tax Administration has recently packed a punch by taking a stricter position on transfer pricing – that is, multinational corporations paying taxes on operations by their subsidiaries to what the taxation body sees as wrong country.
On Monday, the tax authorities said they had so far located 900 million euros in additional taxable income.
The Nokian Tyres situation relates to its operations between 2007-2010. The company has not yet received a decision on its taxation position at the end of the 2011 financial year. The Tax Administration believes that a significant portion of the firm’s Russian subsidiaries' profits will increase its taxable income in Finland.
Nokian Tyres’ interpretation is that this would equate to double taxation, which is against contractual agreements.
At the change of the year, energy firm Fortum announced that state bean counters will hit it with a total bill of nearly 200 million in back taxes. Fortum may also face tax decisions relating to its operations in recent years.
Nokian Tyres was spun off from the Nokia Corporation in 1995, with the final ownership links to it severed in 2003.