Sandvik Told to Pay SEK5.8 Billion in Tax Case

    By Dominic Chopping 
 

STOCKHOLM--Swedish engineer Sandvik AB (SAND.SK) said Thursday that the Administrative Court of Appeal has ruled the company must pay SEK5.8 billion in tax and interest relating to a dispute over tax payments on intellectual property.

 
   MAIN FACTS: 

-In 2005, Sandvik implemented a reorganization of ownership and management of intellectual property rights. All Swedish-owned patents and trademarks were transferred to Sandvik Intellectual Property AB.

-In Dec. 2007, the Swedish Tax Agency did not approve the tax returns for the 2005 and 2006 fiscal years filed by the IP Company and denied deductions for amortization of the intellectual property rights.

-The Court of Appeal decided Sandvik will be taxed for a capital gain in 2005 totaling SEK18.06 billion at the same time as it approves the amortization of the intellectual property rights in the IP Company.

-This will not affect Group earnings, as the additional SEK5 billion tax cost would largely correspond to the tax value of the increased amortization in the IP Company which would be recognized as income.

-However, Sandvik will be required to pay SEK5.8 billion in tax and interest relating to 2005.

-In this case a significant part of the amount would be recovered through reduced tax payments related to increased amortizations in the IP Company.

-It primarily implies a reallocation of tax payments over time.

-Sandvik is analyzing the Administrative Court of Appeal's decision. The ruling will most likely be appealed to the Supreme Administrative Court.

-At 1215 GMT shares traded 1.2% lower at SEK81.

-Write to Dominic Chopping at [e-mail]; Twitter: @WSJNordics

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