Ericsson Likely To Appeal Decision To Up Taxable Income

STOCKHOLM -(Dow Jones)- Swedish telecommunications giant Telefon AB LM Ericsson (ERICY) said it is likely to appeal against a tax authority decision to increase its taxable income by a total 251 million kronor ($1=SEK7.7750) for the three tax years between 2000 and 2002.

The tax authorities have also decided to levy an additional charge amounting to about 40% of the tax on the SEK206 million upward revision to Ericsson's taxable income in 2000.

An investigation made public Thursday concluded Ericsson failed to pay tax relating to a SEK1 billion capital injection, given to Austrian subsidiary, Ericsson Austria, formerly Schark Ericsson Austria, in connection to a deal with three Russian railway companies.

The investigation into the transfers was sparked by events in 1996 when Ericsson's Austrian subsidiary signed a SEK4 billion deal to provide a signaling system for the Russian railways.

To finance the deal, the Russian companies borrowed the entire amount from Bank Austria Creditanstalt AG (BACA.VI), a loan which was guaranteed by Ericsson Austria.

Ericsson's SEK1 billion capital injection was made to help its Austrian subsidiary repay the outstanding loan, but was never properly declared, the tax authorities said.

According to the tax authorities, Ericsson's taxable income will increase by SEK206 million for the 2000 financial year, SEK22 million for 2001 and SEK23 million for 2003.

Ericsson has until Oct. 26 to abide by the decision. But an appeal could delay the process by more than two years, the tax authorities said.

-By Johan Carlstrom, Dow Jones Newswires; +46 8 545 130 99; johan.carlstrom@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 23rd September 2005