26 Contingencies
As an internationally operating group, SoftwareOne is exposed to contingencies in respect of legal and tax claims in the ordinary course of business. It is not anticipated that any material liabilities will arise from the contingent liabilities.
In 2016, the Federal Revenue Office in São José dos Campos (‘DRF/SJC’) issued an infraction notice against SoftwareOne Brazil for the fiscal year 2012, levying alleged debts related to sales tax contributions (‘PIS/COFINS’), charging the difference between the non-cumulative system (9.25%) and the cumulative system (3.65%). The value in dispute of the infraction notice was BRL 9.1 million (CHF 1.6 million) excluding penalty and interest. As expected, in July 2017, the administrative appeal against this infraction notice was rejected. Thus, SoftwareOne Brazil has filed a further appeal before the Administrative Tax Appeal Court (‘CARF’), which was decided unfavourably at CARF level in October 2021, and SoftwareOne was notified to file the appeal. After the notification of the CARF decision, the company filed a motion of clarification against this decision in October 2022. In 2020, The Federal Revenue Office issued a further infraction notice against SoftwareOne Brazil for the fiscal year 2017 for the same subject mentioned above. The value in dispute of the infraction notice was BRL 19.9 million (CHF 3.5 million) excluding penalties and interest. Thus, SoftwareOne Brazil filed a further appeal before CARF against this infraction notice, which was rejected in July 2021. SoftwareOne submitted an action for annulment at court level in November 2021 secured by a litigation bond. Nevertheless, SoftwareOne Brazil and SoftwareOne group are still of the opinion that the cumulative system was and continues to be correctly applied in line with industry standards and are defending their position for both fiscal years 2012 and 2017 with the support of third-party lawyers. Although the probability of the outcome of the dispute cannot be reliably predicted at this stage, SoftwareOne does not expect any cash outflow for the litigations at the reporting date.
In 2019, the National Tax Administration Superintendence (‘SUNAT’) in Lima issued an Infraction Notice against SoftwareOne Peru for the fiscal year 2016, levying alleged debts related to withholding taxes (‘Impuesto a la Renta de no Domiciliados’ – IRND), charging the not contributed withholding taxes related to Software Assurance for payments made abroad. The value in dispute of the Infraction Notice was PEN 5.4 million (CHF 1.3 million) excluding penalty and interest. According to Resolution 042-2014-SUNAT/5D0000 from 2014, licenses purchased abroad are not subject to withholding taxes, whereas services are subject to withholding tax contribution. In June 2020, the administrative appeal (2nd SUNAT instance) against this infraction notice was rejected. Nevertheless, SoftwareOne Peru and the group are still of the opinion that the non-contribution of withholding taxes was and continues to be correctly applied as Software Assurance is defined as licensing and not services in line with the industry standard and is defending its position with the support of third-party lawyers. SoftwareOne Peru therefore filed a further appeal before the administrative tax court (‘Tribunal Fiscal’), the last administrative instance, in July 2020, which ruled in favour of SoftwareOne Peru in January 2021. SUNAT took the right to appeal the decision before the civil court in May 2021. Although the probability of the outcome of the dispute cannot be reliably predicted at this stage, SoftwareOne does not expect any cash outflow for the litigation at the reporting date.
Related to an ongoing tax audit SoftwareOne is potentially exposed to a liability claim for which SoftwareOne is jointly liable for an amount up to a maximum of CHF 4.4 million. The potential liability still needs to be properly assessed building on the outcome of the tax audit. In addition, SoftwareOne’s final obligation will depend on the share of the tax liability borne by the original debtors. Based on the current assessment SoftwareOne expects most of the potential claim to be settled by the original debtors.