Polymetal loses tax battle

By Michael Millar

Date: Wednesday 11 Jul 2012

Precious metals miner Polymetal said it had lost a mult-million dollar court fight with the Russian authorities.

The Russian Supreme Arbitration Court yesterday ordered the group to pay 883m rubles, equivalent to around $27m.

The dispute is over the group selling silver in 2007, which the tax authorities claimed was sold at 30-45% below the market price in order to lower the company's tax bill.

The group unsuccessfully argued that the silver sales to ABN AMRO were part of a $105m loan agreement signed in December 2004, which included forward contract sales at the then current market price.

The firm said that in 2011, based on success in defending the case in lower level courts and an assessment of the group's tax position, the board concluded that the tax authorities would lose.

Accordingly no provision had been created in the financial statements at the end of 2011 for the money it now needs to pay back, the company said.

The additional tax charges will be reflected as an expense in the financial statements for the six months ended 30 June 2012 and are due to be paid in July 2012, Polymetal said.

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