Klövern withdraws its request for a tax reassessment

In late December 2003, Klövern requested for a review of the tax return for the assessment year 2003. This involved a tax-reduction claim amounting to SEK 5 billion regarding Klövern ABs (historical Adcore AB’s) sale of its Adcore Stockholm AB subsidiary. The reduction should have increased the company’s tax deficit and been able to setoff against profit in the company. The National Tax Board has considered this matter during 2004, 2005 and 2006 and, at the National Tax Board’s request, Klövern has submitted complementary information on several occasions to facilitate a decision by the Board. The complementary information have according to Klövern’s and the company’s advisers opinion further strengthened Klövern’s position in the factual matters. The issue about tax surcharge has erased since the National Tax Board considers the information provided by Klövern in the request to be insufficient.

 

Prior to today’s date, Klövern has considered, and been convinced, that the Tax Board would not demand a tax surcharge. However, when faced with a threat of a surcharge, Klövern has decided to withdraw its request for a review in the hope that this will reduce the risk of additional taxation.

 

The question of Klövern’s withdrawal of its request for a review of the tax assessment for 2003 was discussed by the Tax Board in Stockholm on 20 April 2006, and the Board is expected to announce its decision by, at the latest, 5 May 2006. The decision will mean that Klövern’s case of a review is dismissed. The decision may also mean that Klövern is imposed with a tax surcharge of SEK 500 million. It is possible to appeal against a decision of tax surcharge. The question of another review of the tax-reduction claim can be brought up to date by Klövern in the future.

 

“We feel like David in his battle with Goliath”, says Klövern’s President, Gustaf Hermelin. “It is not easy for a company to try to defend its rights, and those of its shareholders, when dealing with a giant like the National Tax Board. Our aim was to get reassessment of a deduction of SEK 5 billion but, in the light of a threat of additional taxation, we withdrew our application for a review. But nonetheless, Klövern still risks a surcharge of SEK 500 million, which Klövern and our advisers find totally incomprehensible. It must be allowed to get one’s case considered by a court without risking penalty in a community governed by law. The National Tax Board hasn’t even been able to specify on what basis it considers to impose us the surcharge.”

 

Today’s developments do not affect Klövern’s other tax deduction possibilities. Klövern has tax loss carry-forwards and tax deductions for depreciation of equipment and amortization of goodwill for the tax year 2004 totalling SEK 2,153 million, in addition to book values. Given Klövern’s present earnings capacity, the company is not expected to incur current tax during the next five years.

 

In view of the above tax situation, a charge of SEK 4 million will be made against Klövern’s income for the first quarter of 2006.

 

Nyköping, 20 April 2006

 

Klövern AB (publ)

 

 

Gustaf Hermelin, CEO, tel +46-(0)155-44 33 10, +46-(0)70-560 00 00, gustaf.hermelin@klovern.se

Anders Lundquist, CFO, tel +46-(0)155-44 33 20, +46-(0)70-528 43 33, anders.lundquist@klovern.se

Britt-Marie Einar, Corporate Communications Officer, tel +46-(0)155-44 33 12, +46-(0)70-224 29 35, britt-marie.einar@klovern.se