On 1 August 2012 it was published that the Supreme Arbitration Court of Russia has recently ordered Polymetal International, a Russian gold and silver producer, to pay RUB883m in additional taxes, penalties and interest as part of a transfer pricing dispute.
The Russian tax authorities claimed CJSC Magadan Silver, a wholly owned subsidiary of the Polymetal Group, lowered its tax base in 2007 by selling forward sale contracts on silver at 30 – 45% below their fair market value to Dutch Bank ABN AMRO.
Polymetal claimed on the contrary that such contracts were part of a USD105m loan agreement with ABN AMRO in 2004, and that the value of these contracts was based on the value in December 2004. Polymetal argued the inclusion of these forward contracts originally entered into with Standard Bank of London and then passed on to ABN AMRO, was necessary to secure this loan, not to lower its tax liability. Moreover, the company pointed out that the transactions were between unrelated parties.
The company has announced that the additional tax charges will be reflected as an expense in the financial statements for the six months ended June 30, 2012 and were due to be paid in July 2012.
The Supreme Arbitration Court ruling is not subject to appeal.
