Nokian Renkaat - Company Announcement

Nokian Tyres received EUR 26.9 million additional payable tax in Finland; the company will make a complaint against the decision

Nokia, Finland, 2013-12-30 13:00 CET (GLOBE NEWSWIRE) -- Nokian Tyres plc Stock
Exchange Release 30 Dec 2013, 2:00 p.m. 

Nokian Tyres received EUR 26.9 million additional payable tax in Finland; the
company will make a complaint against the decision 

Nokian Tyres plc has on 30 Dec 2013 received a reassessment decision from the
Tax Administration, according to which the Company is obliged to pay EUR 26.9
million additional taxes with punitive tax increases and interests concerning
tax year 2007. Payment must be made in January 2014. The total sum demanded by
the tax authorities is EUR 26.9 million, of which EUR 16.0 million are
additional taxes and EUR 10.9 million punitive tax increases and interests. The
Company will record them in full to the financial statement and result of year
2013. 

Large Taxpayers' Office carried out a transfer pricing tax audit regarding tax
years 2007-2011, investigating if the intercompany transactions between Nokian
Tyres plc and its subsidiaries were concluded based on market prices.
Reassessment decisions regarding 2008-2011 have not been received yet. The Tax
Administration states in the reasoning of its decision concerning 2007, that
the transfer pricing was market-based with all other but the Russian
subsidiaries. According to Tax Authorities the success of Russian business is
not based on the modern and efficient production plant in Russia combined with
the sales and logistic network covering whole Russia. Tax Administration
considers the Russian plant as a low risk contract manufacturer. The Tax
Administration has ruled that a significant part of the Russian subsidiaries'
profits should be added to Nokian Tyres' taxable income in Finland. In practice
this leads to double taxation of income, which is contrary to existing tax
agreements. 

Nokian Tyres plc has consistently applied transfer pricing according to tax
laws prevailing at the time. The Company has prepared a transfer pricing
documentation which the Tax Administration has ignored during the tax audit.
The Company considers the reassessment decision of the Tax Administration as
unfounded and is going to appeal against it by leaving the claim for
rectification to the Board of Adjustment and, if necessary, the Company will
continue the appeal process in the Administrative Court. If needed, the Company
will also require the competent authorities to negotiate on the elimination of
the double taxation. The Company is also considering a separate process to
determine the legality of the procedures used in the tax audit by Tax
Administration and tax inspectors. 

The Tax Administration's ruling does not affect the company's dividend
distribution. The Board of Directors will propose to the Annual General Meeting
that the dividend per share for the year 2013 would be at least on the previous
year's level. 

If the claim to the Administrative Court does not lead to annulment of the tax
decision, the Group's corporate tax rate is expected to rise in the next 5
years, from the previously announced 17 per cent to maximum 22 per cent. 

Nokian Tyres' management and the Board are disappointed with the Tax
Administration's ruling. CFO Anne Leskelä: "We have attempted to make every
effort to assist the Tax Authorities to understand the operations of the Group
and our Russian business. Previous tax audit in the company ended to fiscal
year 2006, and in its tax audit report the Tax Administration did not require
any corrections to the transfer pricing between the company and its
subsidiaries already operating at that time in Russia. The interpretation that
the Tax Administration has now made does not contribute to the predictability
of taxation. When enforced, the decision would force the company to consider
carefully how the Group's businesses will be organized. In any case, the
process will take years, and will require Company's efforts and resources."

Nokian Tyres plc

Antti-Jussi Tähtinen
VP, Marketing and communications

Further information:
Mrs. Anne Leskelä, CFO, tel: +358 10 401 7481
Mr. Kim Gran, President and CEO, tel: +358 10 401 7336

Distribution: NASDAQ OMX Helsinki, media, www.nokiantyres.com