Sandvik comments the Administrative Court of Appeal’s ruling

In 2005, Sandvik AB implemented a reorganization of ownership and management of
intellectual property rights. All Swedish-owned patents and trademarks were
transferred to Sandvik Intellectual Property AB (IP Company). The reasons for
this reorganization were the need to gather the activities relating to
intellectual property rights into one company to highlight the considerable
worth of the intellectual property rights and to gain operational advantages.
This reorganization subsequently gave rise to two legal cases relating to
taxation – one concerning Sandvik AB and one concerning the IP company. These
have been considered in a coordinated action by the Administrative Court and the
Administrative Court of Appeal.

In December 2007, the Swedish Tax Agency did not approve the tax returns for the
2005 and 2006 fiscal years filed by the IP Company and denied deductions for
amortization of the intellectual property rights. The following year, the Tax
Agency also denied the IP Company’s deduction for such amortizations. The IP
Company appealed the Tax Agency’s decision. The Tax Agency approved Sandvik AB’s
tax return for 2005. Subsequently, the Tax Agency, through the Public
Commissioner, filed an appeal against its own decision relating to the
reorganization. The Public Commissioner requested that Sandvik AB be taxed in
2005 for a capital gain or, alternatively, an underpriced transfer of
intellectual property rights, totaling approximately 18 billion SEK and, in both
cases, that the deductions for amortization of the intellectual property rights
in the IP Company should then approved. In June 2010, the Administrative Court
approved the Public Commissioner’s request for the taxation of a capital gain.
Sandvik appealed the decision to the Administrative Court of Appeal.

Information relating to the case has been provided on a continuous basis in
Sandvik’s annual reports since 2007.

Sandvik’s appeal has now been addressed by the Sundsvall Administrative Court of
Appeal. The Court of Appeal’s decision is, if the ruling gains legal force, that
Sandvik will be taxed for a capital gain in 2005 totaling 18,063 million SEK at
the same time as it approves the amortization of the intellectual property
rights in the IP Company. However, this will not affect the Group’s earnings,
since the additional tax cost of approximately
5 billion SEK would largely correspond to the tax value of the increased
amortization for tax purposes in the IP Company which according to IFRS
policies, would be recognized as income. However, Sandvik AB will be required to
pay approximately 5,800 million SEK in tax and interest relating to 2005. In
this case a significant part of the amount would be recovered through reduced
tax payments related to increased amortizations in the IP Company. It primarily
implies a reallocation of tax payments over time.

Sandvik is currently analyzing the Administrative Court of Appeal’s decision and
can therefore not give further comments at this point in time. The ruling will
most likely be appealed to the Supreme Administrative Court.

Stockholm, 27 June 2013

Sandvik AB

The information was submitted for publication on 27 June 2013.
For further information, contact Magnus Larsson, Vice President Investor
Relations, Sandvik AB, telephone +46 8 456 12 40 or Pär Altan, Vice President
Group External Communications, Sandvik AB, telephone +46 8 456 12 37.
Sandvik Group
Sandvik is a global industrial group with advanced products and world-leading
positions in selected areas – tools for metal cutting, equipment and tools for
the mining and construction industries, stainless materials, special alloys,
metallic and ceramic resistance materials as well as process systems. In 2012,
the Group had about 49,000 employees and representation in 130 countries, with
annual sales of approximately 99 billion SEK.