Deutsche Post ordered to pay €516m extra VAT
Deutsche Post DHL has been handed an additional tax bill by the German government for EUR 516m, following a review of its tax payments from 1998 to 2010. The German postal service said today the review stemmed from an amendment to the country’s VAT legislation, which came into force at the start of July 2010.
The firm had already reserved cash to cover an expected tax demand, and said as a result its earnings this year will only be affected to the tune of EUR 180m before tax.
Along with the amended VAT law, Germany’s financial authorities also took a retrospective look at several of Deutsche Post’s postal services, which were previously exempt from VAT.
Deutsche Post said various interpretations of EU and German VAT law could be made regarding postal services, but confirmed in a statement issued today: “The Group will accept the decision taken to establish legal certainty and avoid years of legal battles with uncertain outcomes.”
The company said it will now make a one-time payment of the full EUR 516m to the German government during the third quarter of 2012.
“As the company had already formed reserves in previous years, Group EBIT in the second quarter of 2012 will be impacted by EUR 180m. The impact on net profit is expected to be EUR 265m,” the company advised investors, adding that previous guidance for results in the rest of 2012 remained unchanged.
Last week, the German government issued a separate demand for Deutsche Post to repay EUR 298m in state aid, which European Commission antitrust regulators decided had been wrongfully allowed during the late 1990s and early 2000s.
Deutsche Post is appealing the state aid demand, which relates to claims that German regulators allowed higher postal rates than would otherwise have been needed, to help cover Deutsche Post pension liabilities, a situation the EU Commission said was not compliant with EU rules on fair competition.
Credit rating review
Credit ratings agency Standard & Poor withdrew its CreditWatch negative assessment from Deutsche Post last week.
The assessment had been made back in January, following initial warnings that the state aid demand might have been as much as EUR 1bn.
Standard & Poor said last week that it had reassessed its “BBB+/A-2” long-term and short-tem ratings for the logistics giant in the light of the less-than-expected amount of state aid ordered for repayment.
It said it now believed Deutsche Post would enjoy a “stable outlook”, and would “benefit from existing cost-cutting initiatives and further market recovery in the medium term”.
Deutsche Post’s risk profile is now described by the agency as “satisfactory”, despite the weak economic environment and ongoing decline in the mail business, which it predicted would see mail earnings decline from 40% of group revenue to about a third of revenues by 2014.
