Orange : Orange :Tax litigation in relation to financial year 2005: Orange to
Paris, 25 July 2013
Tax litigation in relation to financial year 2005: Orange to appeal
In a judgment dated 4 July 2013, the Administrative Court of Montreuil
(France) rejected the Group's motion for judicial review, which was submitted
in November 2011, in legal proceedings regarding tax issues following a
simplification of the Group's corporate structure in 2005.
This operation, implementing a decision to simplify the Group's organization,
consisted of a merger (transmission universelle du patrimoine) into France
Telecom S.A. (now Orange S.A.) of a French holding company that held about 60
subsidiaries and shareholdings; this operation had no impact on the Group's
corporate and consolidated earnings.
Due to significant losses recorded by some of these assets, provisions for the
impairment of shares of that holding company were recorded in the Group's
accounts before the transmission universelle du patrimoine. However, in
conformity with the tax authority's position at the time, these provisions
were never deducted from the company's taxable income. The dissolution without
liquidation of the holding company then led France Telecom to a reversal of
these provisions for impairment of shares. These reversals were not accounted
back into the tax earnings of the Group, in line with applicable fiscal rules
and in order to avoid double taxation.
Orange takes note of this decision that effectively prevents a company from
deducting provisions from its taxable income and leads to a second imposition
on these same provisions once reintegrated into the company's accounts. This
simple analysis fully justifies an appeal against this judgment; in
consequence, the Group will file a case in the coming days.
Since the appeal process does not have the effect of suspending payments, the
amount of €1.952 billion will be paid to the tax authorities at the end of
July and an amount of €190 million in September, the latter corresponding to
additional late interest.
This tax litigation is disclosed in the Group's Reference Document since 2010,
from which year it has also been provisioned for in the Group's financial
accounts (refer to §10.1 of the Registration Document for 2010, page 418), and
updated since (for the most recent update, refer to the Registration Document
for 2012, §12.1, page 406). In addition, the information given to the market
on this tax litigation has been widely taken into account by analysts in their
valuations (in the "sums of the parts", under section "tax liability").
In keeping with its prudent financial policy, the Group has maintained a high
level of liquidity allowing it to meet these payments now.
In addition, the judgment of the Court has no impact on the operating
performance of the Group.
Orange is one of the world's leading telecommunications operators with sales
of 43.5 billion euros in 2012 and has 170,000 employees worldwide at 31 March
2013, including 104,000 employees in France. Present in 32 countries, the
Group has a total customer base of close to 230 million customers at 31 March
2013, including 172 million mobile customers and 15 million broadband internet
(ADSL, fibre) customers worldwide. Orange is also a leading provider of global
IT and telecommunication services to multinational companies, under the brand
Orange Business Services.
Orange is listed on the NYSE Euronext Paris (symbol ORA) and on the New York
Stock Exchange (symbol ORAN).
For more information on the internet and on your mobile: www.orange.com,
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are trade marks of Orange or Orange Brand Services Limited.
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Orange: Tax litigation in relation to financial year 2005
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