Stock Exchange Release 20 June 2017, at 10 p.m.
The Finnish Tax Administration has concluded the tax audit of Silmäasema Optiikka Oy, a fully owned subsidiary of Silmäasema Oyj. The tax audit covered corporate income taxation, value added tax and withholding tax. The main focus of the audit was on the value added tax, which was reviewed for the years 2014-2016. The audit of the corporate income tax and withholding tax covered the year 2015. Other companies in the Silmäasema Group have not been subject to the tax audit.
Silmäasema and the Finnish Tax Administration have a difference of view related to the allocation of the business between taxable retail sales and tax-free healthcare and medical services. The most significant differences of view are related to both eye examinations carried out by opticians in connection with the sales of eyeglasses as well as of private entrepreneur ophthalmologists practicing in Silmäasema premises. Tax audit and differences in the Finnish Tax Administration's view in comparison with Silmäasema's practice in value added tax was described in the Offering Circular published on 26 May 2017 in relation with Silmäasema's IPO.
The Finnish Tax Administration has today issued its taxation decision regarding the tax audit of value added tax. According to the decision of the Finnish Tax Administration, approximately EUR 1.4 million (net impact) of value added tax from the years 2014-2016 and a punitive tax increase of EUR 150,000 is payable by Silmäasema Optiikka Oy. This decision is in accordance with the detailed description in the Offering Circular of Silmäasema. In addition, the Finnish Tax Administration has issued a penal interest of approximately EUR 135,000. These are payable in July 2017.
"The interpretation and the practice related to value added tax deductibility expressed by the Finnish Tax Administration restricts, according to our view, for no reason, the deductibility of value added tax in a manner that differs from the calculation principles that comply with the real tax-free business of Silmäasema's optical retail stores. We consider the Finnish Tax Administration's decision to be incorrect, and we intend to appeal the taxation decision to the Board of Adjustment of taxation and, when needed, to the Court. In addition, we have registered the value added tax according to the same principles for more than 20 years, and the Finnish Tax Administration has also neglected the doctrine of legitimate expectations for the benefit of the tax payer.," says Pasi Kohmo, CEO of Silmäasema Oyj.
Despite the differences of view, Silmäasema Group will change its practices related to value added tax deductibility as a result of the decision of the Finnish Tax Administration, which in practice means decreasing the deductible portion of value added tax relating to overhead costs and capital expenditure. Silmäasema estimates that the negative effect of the change in value added tax deductibility in the year 2016 would have been approximately EUR 590,000, consisting of EUR 420,000 for the purchase price of the investments and directly impacting the profit and loss of overhead costs by EUR 170,000.
Silmäasema believes the change in the treatment of value added tax to be temporary and is going to seek appeal to the decision. Due to this Silmäasema will in the future eliminate the change in value added tax deductibility when reporting adjusted EBITDA and adjusted EBIT.
No decisions have yet been received related to corporate income tax and the current decision related to value added tax is estimated to deduct the corporate income tax payable by approximately EUR 150,000 for the years 2014-2016.
Additional information:
Pasi Kohmo, CEO, Silmäasema, +358 50 331 7015, pasi.kohmo@silmaasema.fi
Anu Kankkunen, CFO, Silmäasema, +358 50 66969, anu.kankkunen@silmaasema.fi
Silmäasema in brief
Silmäasema is a Finnish company, which offers all products and services for optical retail and eye healthcare nationwide. Silmäasema is the largest private eye clinic provider offering eye surgeries and the second largest optical retail chain with 25.3 per cent market share. The Silmäasema chain has 148 stores and 13 eye clinics as well as eight stores in Estonia. The Silmäasema chain employs close to 1,000 eye healthcare professionals. In 2016, the Silmäasema chain conducted around 210,000 optician's eye examinations, 190,000 ophthalmologist's appointments and over 15,000 cataract and refractive surgeries. Silmäasema's Group net sales were 101.3 million euros in 2016 and adjusted EBITDA was 12.0 million euros.
