Orange said it will appeal a decision by the administrative court of Montreuil to reject is motion for judicial review in legal proceedings regarding tax issues following a simplification of the group’s corporate structure in 2005. The merger of a holding company that held around 60 subsidiaries and shareholdings into France Telecom (now Orange) had no impact on group earnings. Due to significant losses by some of the divisions, provision for the impairment of the holding company were recorded in the group’s accounts before the merger, but the provisions were not deducted from taxable income in conformity with the tax authority’s position at the time. France Telecom then reversed the provisions without accounting back into the tax earnings in order to avoid double taxation.
Orange takes note of the court’s decision that effectively prevent a company from deducting provisions and leads to a second imposition on the same provisions once reintegrated into company accounts. Since payments cannot be suspended during the appeal process, Orange will pay EUR 1.95 billion to the tax office at the end of July and EUR 190 million of additional late interest in September. The group has kept high levels of liquidity to be able to meet these payments. The court decision has no impact on operating performance.
