Ferrexpo reduced tax payments 88.7% in 2023, confident its own assessment is correct

MOSCOW. April 18 (Interfax) - Mining company Ferrexpo plc, with assets in Ukraine, reduced tax payments 88.7% in 2023 to $12.779 million from $110.243 million in 2022 ($228 million in 2021), Ukrainian media reported, quoting the company's financial statement.

The group's two major subsidiaries in Ukraine received the tax audit reports in September and November, stating potential claims for underpayment of corporate profit taxes of UAH 2.162 billion ($56.921 million) and UAH 259 million ($6.819 million), without fines and penalties, respectively.

Both subsidiaries filed the objections against the potential claims.

"Based on past experience, it is to be expected that no agreements will be reached with the tax authorities and that the claims will be heard by the courts in Ukraine," Ferrexpo said. No final court rulings had been made on this issue as of the date the consolidated financial reporting was approved.

Two audits were earlier initiated by the State Tax Service of Ukraine (STS), formerly known as State Fiscal Service of Ukraine (SFS), in relation to the sale of iron ore products by Poltava Mining during the financial years 2015 to 2017 and cross-border transactions of another Ukrainian subsidiary outside of Ukraine.

In relation to claims regarding a tax audit of cross-border transactions at Poltava Mining, the Supreme Court of Ukraine ruled on June 27, 2022 partially in favor of the SFS, as a result of which an amount of UAH 234 million ($7.999 million) became a legally binding obligation and was paid in July 2022. The Group believes that it has complied with the applicable legal provisions in all its cross-border transactions.

In terms of the new claims received, the Group will continue to defend its methodology applied to determine the prices between its subsidiaries in the Ukrainian courts.

"The Group operates across a number of jurisdictions through its value chain and prices its sales between its subsidiaries using international benchmark prices for comparable products covering product quality and applicable freight costs. The Group judges these to be on terms which comply with applicable legislation in the jurisdictions in which the Group operates," Ferrexpo said.

Ferrexpo had a net loss of $84.75 million in 2023, compared with profit of $220 million in 2022. Revenue almost halved to $651.8 million.

Ferrexpo owns 100% Yeristovo Mining and Poltava Mining and 99.9% of Belanovo Mining. The businessman Konstantin Zhevago is the majority shareholder.