Notification on material event
An agreement has been reached with the Lithuanian State Tax Inspectorate
AB “Novaturas“ (the Company) announces about the agreement that has been signed up today with the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania (STI) on taxation of the Company's goodwill.
The STI has completed the Company's tax audit for 2014-2018 period. According to the STI, during the 2014-2018 period, the Company‘s goodwill that comprised from the acquisition of “Novaturas“ shares in 2007 and the subsequent merger of the “Central European Tour Operator“ with Company in 2008, the Company unfoundedly attributed the amortization costs as allowable deductions for income tax purposes. In the opinion of the STI, the tax loss related to goodwill amortisation that incurred in the period of 2008-2013 also could not have been used (carried forward) while calculating the taxable profit for the period of 2014-2018.
The Company did not agree on the assessments made by STI in regards with the tax inquiry results conducted by the STI in the 2013, when no observations were made regarding the amortization of the goodwill, as well as other important legal arguments (legal provisions regulating the amortization of goodwill for the income tax purposes, which have not changed). However, in order to minimize the costs and obviate processes that requires a lot of bilateral efforts, material and time resources and thus to avoid a long-running potential tax dispute, after lengthy negotiations and discussions on the STI's changed approach to the application of goodwill taxation rules, the Company and the STI made a decision to agree on the amount of the tax.
Both parties have agreed that the Company will pay the amount of EUR 894,119 of profit tax to the state budget for the period under review (2014-2018) due to the attribution of goodwill amortization expenses to allowable deductions and declared operating tax losses deducted from operating profit. It was also agreed that no interest of late payment or a fine on the specified amount (EUR 894,119) will be calculated for the Company. It was also agreed that the Company during the period of 2019-2023 will pay income tax on the taxable income without deducting amortization of their goodwill from it. This decision allowed the Company to fix its costs avoiding a tax dispute over the application of legal requirements which are not subject to established clear case law.
Taking into account the current economic situation and the fact that the Company is included in the list of legal entities subject to tax aid measures for COVID-19 without a request, the management of the Company, after the emergency situation within the country will be lifted, intends to apply the State Tax Inspectorate with a request to conclude a tax loan agreement. The effect of this agreement will be assessed and included upon completion of the audit of the Company's annual financial reports for year 2019.
About Novaturas Group
Novaturas Group is the leading tour operator in the Baltics states. Since 21 March 2018, Novaturas shares have been dual-listed on the Warsaw Stock Exchange and on Nasdaq Vilnius.
Novaturas was established in 1999, became the market leader in the Baltics in 2004. Aside from the Baltics, Novaturas has begun offering its products in Belarus, where they are retailed through local partners.
Novaturas continues to attract new clients thanks to its attractive and diverse offering and the high quality of its services. The Group offers both summer and winter package holidays as well as sightseeing tours by coach or plane to more than 30 destinations worldwide, including the most popular holiday resorts in Southern Europe as well as select locations in North Africa, the Middle East, Asia and Latin America.
The Group's strategy also aims to retain diverse and complementary distribution channels. Novaturas works with over 400 travel agencies, including all of the major agencies in the Baltics. It also operates retail offices of its own in main cities of Lithuania, Latvia and Estonia, and is investing in further development of its e-commerce channel.
The Company’s asset-light business model, which is characterized by strong cash flows from operating activities and low capital expenditures, allows it to pay out a large part of its earnings to shareholders. Paying regular dividends is one of the key elements of the Company's strategy. Every year the Management Board expects to propose for distribution 70-80% of the Company’s net profit.
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