Act on Controlled Foreign Corporations (“CFC”)
On 1 January 2015 tax rules came into force regarding the taxation in Poland of controlled foreign corporations, whose direct or indirect shareholders are Polish payers of corporate income tax (art. 24a of the Act dated 15 February 1992 on corporate income tax (unified text, Journal of Laws from 2014, item 851 with subsequent amendments; hereafter: Act on CIT)).
The rules regarding CFC are applicable to foreign corporations with their registered head office or management board based within the territory of a country which either practices harmful tax competition, or with which Poland has not signed an international agreement, or the European Union has not signed an international agreement on the exchange of information. The rules regarding CFC are also applicable to entities from the EU/EEA (or from other countries with which Poland has signed an agreement), if the following conditions are met:
a) a resident of Poland owns indirectly or directly at least 25% of the share capital, 25% of the voting rights or 25% of the income of a foreign corporation for at least 30 consecutive days;
b) the foreign corporation has mainly (i.e., at least 50%) passive income (eg., dividends earned otherwise than in a manner based on EU directives on parent entities, interest, intellectual proprty rights, capital gains);
c) the income of a foreign corporation is taxable based on nominal rates lower than 14.25% (i.e., 75% of the income tax rate in force in Poland) or the given income is not taxable or takes advantage of tax-exempt status, unless this income is exempt from taxation in the home country or that of the management board receiving it on the basis of EC directive 2011/96/UE dated 30 November 2011.
The taxable base is the income of a controlled foreign corporation in that part respecting the interest held related to the right to participate in the profits of the said corporation, after deducting (i) the dividends received by the Polish corporate taxpayer from the controlled foreign corporation, and (ii) the amount received from the sale of shares in a controlled foreign corporation. The amount which is not deducted in a given tax year may be deducted over the next five consecutive fiscal years. In accordance with CFC rules, the income earned in a given tax year is the sum of the excess of revenues over deductible costs, which are set by the Polish Act on CIT, regardless of the source of the revenues, set on the last day of the fiscal year of the controlled foreign corporation.
Income earned by a controlled foreign corporation is subject to corporate income tax in Poland at the rate of 19%. In principle, tax which is payable in Poland may be reduced by the amount of tax paid abroad by a controlled foreign corporation, as long as there is an international agreement, to which Poland is a party, based on which Polish tax authorities may receive tax information from the tax authority of the country in which the controlled foreign corporation has tax residency.
The rules regarding CFC introduce the following additional administrative and reporting obligations:
a) keeping a register of foreign companies,
b) keeping track of economic events which take place in the controlled foreign corporations, and
c) the obligation to file a separate declaration on the income of each controlled foreign corporation earned in a given fiscal year – by the end of the ninth month of the subsequent fiscal year – and to pay within this period the tax due.
Appropriate procedures are being implemented in the KGHM Polska Miedź S.A. Group in order to meet the obligations with respect to CFC rules (maintaining the required data, maintaining a register, documentation, tax calculation, filing CFC tax declarations in Poland).
Extension of validity of the guarantee towards the Lower Silesia Voivodeship
On 12 January 2015, at the request of KGHM Polska Miedź S.A., the bank cooperating with the Parent Entity extended the validity of a guarantee in the amount of PLN 320 million by a further two months. The new term of validity of the guarantee expires on 31 March 2015.This guarantee secures the liabilities of the Parent Entity towards the Lower Silesia Voivodeship.
The guarantee was issued in connection with art. 32 sec. 1 of the Act dated 10 July 2008 on mining tailings, aimed at ensuring proper execution, by an owner of tailings which operates a mining tailings treatment pond, of obligations respecting the closure of the mining tailings treatment pond and restoration of the terrain.
Unsecured, revolving syndicated credit facility
On 20 January 2015, KGHM Polska Miedź S.A. has drawn the instalment of the unsecured, revolving credit facility. The credit in the amount of USD 200 million (i.e. PLN 747 million at the exchange rate announced by the NBP at the date the installment was drawn) was drawn for the period of 3 months with the intent to extend it to the subsequent periods. Interest on the credit facility is based on LIBOR rate plus a bank’s margin. The acquired funds were used for refinancing of the financial debt of KGHM INTERNATIONAL LTD. Consolidating the Group’s external financing at the Parent Entity’s level is a key provision of the new financing strategy.
The strategy will enable to attain significant savings on debt servicing costs and is in line with the best market practices for the financing of international groups.
On 28 January 2015, KGHM INTERNATIONAL LTD. repaid USD 200 million in debt arising from the credit facility agreement entered into with a syndicate of banks, and as at that date the agreement expired.
Strategy for the years 2015-2020 with an outlook to 2040
On 26 January 2015 the Strategy of KGHM Polska Miedź S.A. for the years 2015-2020 with an outlook to 2040, submitted by the Management Board, was approved by the Parent Entity’s Supervisory Board. Adoption of the Strategy is connected with the prior completion of key provisions of the previous Strategy of KGHM Polska Miedź S.A., which was approved on 23 February 2009.
On 26 January 2015 the Management Board of KGHM Polska Miedź S.A. adopted a resolution related to the Dividend Policy. The Dividend Policy of KGHM Polska Miedź S.A. is part of its on-going efforts to ensure a balance between dividends paid out to shareholders and opportunities to efficiently invest the Parent Entity’s funds.
The Dividend Policy of KGHM Polska Miedź S.A. assumes that the Management Board will recommend allocation of up to one-third of the net profit for the previous financial year as a dividend, while taking into account the current and anticipated financial situation of the Parent Entity and the Group. In particular, in making its recommendation the Management Board will take into account the KGHM Polska Miedź S.A. anticipated requirements for capital to complete the development program as well as a safe debt level for the Group. The final decision regarding the amount of dividends paid is made by the General Meeting of KGHM Polska Miedź S.A.
Call for the sale of shares of BIPROMET S.A.
On 29 January 2015, the Management Board of KGHM Polska Miedź S.A. announced (as Bidder) a tender offer to purchase 2 107 932 ordinary bearer shares of BIPROMET S.A. representing 34% of this entity’s outstanding shares. KGHM Polska Miedź S.A. currently owns 66% of the shares of BIPROMET S.A. and as a result of the tender intends to acquire 100% ownership of this company. The tender opened on 19 February 2015, with conclusion set for 20 March 2015.
Announcement of Plan to reorganise POL-MIEDŹ TRANS Sp. z o.o. – a subsidiary in the KGHM Polska Miedź S.A. Group
On 25 February 2015, the Management Board of POL-MIEDŹ TRANS Spółka z ograniczoną odpowiedzialnością announced that the Division Plan for POL-MIEDŹ TRANS Sp. z o.o (a company in the course of being divided) has been agreed, approved an signed under art. 529 § 1 point 4 of the Commercial Partnerships and Companies Code, by separating from POL-MIEDŹ TRANS Sp. z o.o. assets representing organised parts of the company to the following acquiring companies:
- PHP „MERCUS” sp. z o.o. with its head office in Polkowice (acquiring company 1);
- KGHM ZANAM Sp. z o.o with its head office in Polkowice (acquiring company 2);
- „Energetyka” sp. z o.o. with its head office in Lubin (acquiring company 3); and
- The newly founded company which will operate under the name PMT Linie Kolejowe 2 Sp. z o.o., with its head office in Owczary (acquiring company 4).
The division will be carried out by separating assets of the divided company to an already existing company or to a newly founded company. The details of the Division Plan have been made publically available at the website www.pmtrans.pl.
Extension of repayment date of the working capital loan
In 2015, the Parent Entity has extended the period of utilisation of the working capital loan in the amount of USD 162 million (under the Agreement for a Multipurpose Credit Line with Bank PEKAO S.A.). In the period from 6 January to 3 April 2015, the credit’s interest is basd on the LIBOR rate plus a margin. The Agreement states that the working capital loan is available to 8 August 2016.
Recommendation on payment of dividend
On 16 March 2015, the Management Board of KGHM Polska Miedź S.A. resolved to recommend the payment of a dividend from profit for financial year 2014 in the amount of PLN 800 million (or PLN 4 per share).
The final decision regarding the amount of dividends paid is made by the General Meeting of KGHM Polska Miedź S.A.