Rejection of requests for the repayment of adverti

In their stock exchange notice published on 25 August 2014, Tallinna Kaubamaja Grupp AS notified that their subsidiary companies Selver AS, Kaubamaja AS, AS Viking Motors, Kia Auto AS, Tallinna Kaubamaja Kinnisvara AS, Tartu Kaubamaja Kinnisvara OÜ and TKM Beauty Eesti OÜ request the repayment of advertising tax paid from June 2011 to July 2014 in Tallinn, Tartu, and Pärnu. The requests for repayment were submitted with the explanation that the regulation on advertising tax is in conflict with the constitution. The administrative courts of Tallinn and Tartu did not satisfy the requests for the repayment of advertising tax (stock exchange notices of 11 February 2015, 21 May 2015, and 1 December 2015). Appeals concerning the requests for the repayment of taxes paid in Pärnu and Tartu submitted to the district courts of Tallinn and Tartu were also rejected (stock exchange notice of 19 May 2016). Subsidiary companies of Tallinna Kaubamaja Grupp AS submitted appeals in cassation to the Supreme Court against these resolutions.

On 21 February 2017, with the resolution in administrative matter 3-3-1-48-16, the Supreme Court decided not to satisfy the appeal in cassation of the subsidiary companies of Tallinna Kaubamaja Grupp AS Selver AS and JCDecaux Eesti OÜ, Clear Channel Estonia OÜ and Neste Eesti AS concerning advertising tax paid in Pärnu. The Supreme Court stated that the regulation on advertising tax is not in conflict with the constitution. According to the opinion of the Supreme Court, the requirement to specify the upper limit of the tax at the legal level proceeding from § 113 of the constitution and the practice of the Supreme Court does not apply in the case of local taxes. The Supreme Court also stated that the infringement related to advertising tax is not intensive for undertakings and therefore the non-specification of the upper limit of the tax in the law is not in conflict with the constitution.

Proceedings for the request for the repayment of advertising tax paid in Tartu is pending in the Supreme Court and the proceedings for the request for the repayment of tax paid in Tallinn in Tallinn District Court. These disputes will most likely also be resolved based on the same principle and the requests of the subsidiary companies of Tallinna Kaubamaja Grupp AS will not be satisfied.

The resolution of the Supreme Court has no negative consequences for the subsidiary companies of Tallinna Kaubamaja Grupp AS, as the disputed sums of advertising tax have been paid to the cities of Tallinn, Tartu, and Pärnu, and due to the performance pay agreement, the companies have practically no current costs related to the legal disputes.

         Raul Puusepp          Chairman of the Management Board          Phone +372 731 5000