Administrative Court rejects Fabege's appeal in tax case

Administrative Court rejects Fabege's appeal in tax case

The Swedish Tax Agency has in several decisions ruled that companies in the
Fabege Group are to have their tax assessments increased in respect of a number
of property sales via limited partnerships. As at 31 March 2010, the total
increase in taxable income amounts to SEK 5,031m. The decisions have resulted in
total tax demands of SEK 1,484m plus a tax penalty of SEK 182m, making a total
demand of SEK 1,667m excluding interest payments. The amount includes an
additional new case that arose during the first quarter of 2010, which is to
tried under the Swedish Tax Evasion Act.

The Administrative Court (formerly the County Administrative Court) has issued
verdicts concerning several of Fabege's tax cases. The Administrative Court in
Stockholm has approved the Tax Agency's decisions. In arriving at its verdict,
the Administrative Court had no cause to determine whether the Swedish Tax
Evasion Act could have been applied. As a result of these verdicts, Swedish
Fabege companies have been taxed for sales revenues that accrued to Dutch Group
companies - the sales revenues have been “reallocated” to the Swedish minority
ownership of the companies. 

The Administrative Court's verdicts pertain to cases for which the matter of
reallocation of earnings has been tried. They do no encompass other cases in
which only the matter of tax evasion is to be tried.

In total, the verdicts will entail an increase in taxable income by SEK 2,858m,
and a total tax demand, including the tax penalty, of SEK 727m. To this will be
added an interest payment of SEK 84m. The original tax demand, pertaining to an
offsetting of revenues against loss carry-forwards, has been reduced by SEK
176m. These carry-forwards have not been recognised in Fabege's balance sheet. 

The Administrative Court's verdicts will be appealed by Fabege, which is of the
opinion that the Administrative Court has disregarded a number of important
aspects and that the verdicts are therefore incorrect - an assessment shared by
Fabege's advisors on the matters. In the opinion of Fabege there are good
reasons to believe that the Administrative Court of Appeal will amend the
Administrative Court's rulings to the benefit of Fabege. The Board of Directors
has decided not to make a provision in the balance sheet to cover this amount,
which is recognised as a contingent liability, as in previous financial
statements. 

Fabege AB (publ)