Sisal Annual Report 2011 - Permira

Following this NoF, on December 17, 2009, the Milano 2 Local Office notifiedthe Group company of an assessment for the unlawful deduction of VAT for EUR530,000 in 2005, plus interest, and imposed fines for the same amount. During2010, the company promptly appealed the assessment before the Milan ProvincialTax Commission and the first hearing, also in relation to the following commentsbelow, was postponed to the end of June 2012.On May 10, 2010, the Milan Tax Police Nucleus, Second Complex Inspection Section,entered Sisal S.p.A. with a service order to perform a tax inspection for purposesof direct income taxes for the tax years 2008 and 2009. Later, on June 7,2010, the officers charged with the inspection presented the company a supplementaryorder extending the inspection to cover the tax years from 2005 to 2007only with regard to the effects of the same above-mentioned extraordinary operationmentioned for the acquisition of control of the Sisal Group which took placeduring 2005. The inspection activities were concluded on September 23, 2010with the issue of a NoF in which the inspectors sustained that the extraordinaryoperations put in place for the above acquisition fall under the scope of the antievasionlaw under art. 37-bis of DPR 600 of September 29, 1973. According tothe thesis of the inspectors, the deeds and juristic acts realized as part of theseoperations would have been lacking in valid economic reasons and would havegenerated an unlawful tax advantage represented by the company’s deduction offinance expenses for IRES tax purposes. In particular, the finance expenses whichwould be unlawfully deducted, in the inspectors’ opinion, amount to a total ofapproximately EUR 37 million between the years 2005 and 2008 in addition to, onthe basis of the indication to the competent office contained in the NoF, expensesrelating to the year 2009, for which – at the date of the NoF – the deadline forfiling the tax return had not yet expired, estimated in the NoF at about EUR 9.5million.On the basis of that NoF, on November 19, 2010, the Milan Provincial Office II sentthe Group company a request for clarifications under ex art.37-bis, DPR 600 ofSeptember 29, 1973, for the tax period 2005. The company, on January 17, 2011,replied to the questionnaire providing ample arguments and documentation asconfirmation of the inapplicability of art. 37-bis cited above.During the early months of 2012, the company, advised by its consultants, neverthelessconsidered it opportune to file a tax settlement proposal regarding theabove findings in order to start a formal procedure for discussions over the possiblereduction of the demands noted in the findings issued, however without anybinding obligation to accept any proposals from the Office. Currently, there are noother known significant developments in this case.35 DIRECTORS’ REPORT ON operations