Supreme Administrative Court Decision Regarding Sanoma
The Supreme Administrative Court has recently rejected Sanoma’s application for permission to appeal the VAT treatment related to the distribution of certain magazines at Media Finland. This decision follows a series of payment decisions involving the Finnish Tax Adjustment Board concerning Sanoma Media Finland Oy for the years 2015 to 2018.
Details of the Court's Ruling
The Supreme Administrative Court's dismissal means that the previous ruling by the administrative court will stand. Consequently, Sanoma's VAT claims and related challenges will not be further addressed in the appeals process. Importantly, this decision does not adversely affect Sanoma’s financial status or its free cash flow since the VAT claims have already been settled in 2021 and 2022, and were accounted for in Sanoma's Q2 2023 financial results.
Chronology of Sanoma's VAT Issues
Sanoma's challenges began on 29 April 2021, when the company disclosed that it had received a payment decision from the Finnish Tax Adjustment Board. This initial decision required the company to pay approximately EUR 25 million covering VAT, penalties, and interest, incurred during tax audits regarding how VAT was handled for certain magazines printed across Europe and centralised through a logistics centre in Norway.
In December 2022, Sanoma faced another similar decision related to tax audits performed from 2019 to 2021, which resulted in an additional payment of around EUR 11 million in VAT, penalties, and interest. Sanoma contested both decisions, deeming them unjustified, and took further steps to appeal the second payment to the Finnish Tax Adjustment Board, which is still ongoing.
Impact on Financial Reporting
The administrative court's rulings have led to the recording of significant VAT claims that span both the 2015?2018 and 2019?2021 periods, with an approximate combined net amount of EUR 30 million booked as non-comparable items in Sanoma's Q2 2023 results. This comprehensive approach reflects the company's strategy to ensure its financial presentations are transparent amidst ongoing tax issues.
Company Overview
Sanoma is recognized as an innovative and agile company in the learning and media sectors, reaching millions daily with its products and services. It emphasizes its commitment to sustainability and aims to maximize its societal impact while minimizing environmental effects. Sanoma actively participates in the UN Sustainable Development Goals and is a signatory to the UN Global Compact.
With a commitment to enhancing educational experiences, Sanoma develops products and services that empower educators to foster students’ talents, providing both print and digital resources for various educational levels. The Finnish media segment of Sanoma is dedicated to delivering independent journalism and exciting entertainment to audiences of all generations, supported by a strong cross-media presence offering extensive reach and customized marketing solutions for partners.
Employing over 5,000 professionals, Sanoma operates in twelve European countries. The company reported approximately 1.4 billion euros in net sales for 2023, accompanied by an operational EBIT margin excluding PPA of 12.6%. Notably, Sanoma’s shares are listed on Nasdaq Helsinki (Helsinki: SAA1V), reflecting its robust standing in the market.
Frequently Asked Questions
What was the outcome of the Supreme Administrative Court's ruling for Sanoma?
The court rejected Sanoma's application for an appeal regarding the VAT treatment related to Media Finland, maintaining the administrative court’s decision.
How does the ruling affect Sanoma's finances?
The decision does not impact Sanoma’s financials or free cash flow as previous VAT claims were settled and recorded in prior financial results.
What led to Sanoma's appeal to the administrative court?
Sanoma contested payment decisions from the Finnish Tax Adjustment Board that deemed certain VAT treatments unjustified, leading to significant financial liabilities.
What actions is Sanoma taking following the court's decision?
Sanoma is continuing with its ongoing appeal against the second VAT payment decision concerning audits from 2019 to 2021.
How does Sanoma contribute to education and sustainability?
Sanoma provides educational resources to support teachers and commits to sustainability by minimizing its environmental impact, aiming to have a positive societal influence.
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