Orascom Construction Industries will pay LE7.1 billion (approx. $1bn) in settlement over its tax dispute with the Egyptian government
Orascom Construction Industries (OCI) said in a statement on Tuesday it has reached a settlement over its tax dispute with the government, prompting prosecution to remove travel bans imposed on the company founder and CEO.
The company will pay the government LE7.1 billion (approx. $1 billion) in ten instalments during the 2013-2017 period.
Accordingly, the prosecutor-general lifted the travel ban imposed on OCI's founder Onsi Sawiris and its CEO Nassef Sawiris. The prosecution said it removed the travel ban after receiving settlement documents from Egypt's tax authorities, Al-Ahram's Arabic news website reported.
OCI, Egypt's largest listed firm, was charged with evading $2 billion of taxes on the 2007 sale of its subsidiary Orascom Building Materials Holding (OBMH) to cement giant Lafarge on Egypt’s stock exchange.
As per the settlement, OCI will begin by an initial payment of LE2.5 billion by mid-May, LE900 million by December, six equal installments of LE450 million and two final installments of LE500 million in 2017.
The settlement was based on the originally disclosed tax claim by the tax authority of LE4.7 billion, which includes accrued interest and delay fees, according to the OCI statement.
OCI insisted on its original position that it had not violated any laws. It said it was faced with two choices, to either enter into a legal battle with the government or make the payment to the government.
"[OCI's] board and management concluded that a prolonged legal process would not be in the best interest of the company's stakeholders, including its 45,000 employees in Egypt, who represent 50 percent of the group's employee base," the company statement read.
The company also said that in conjunction with the settlement, the Egyptian Tax Authority "has determined that there was no tax evasion by the company and is exonerating management and the company from any wrongdoing related to the transaction."
In 2007, OCI listed its cement subsidiary OBMH in the stock exchange for just a few months in order to benefit from the tax exemption Egypt made to deals made on the stock exchange. Accordingly, the $12 billion sale of OBMH to Lafarge was not subject to taxes.
OCI's parent company, Dutch-listed OCI N.V., said it would supply its subsidiary with the required funds for the tax settlement through intercompany loans.
In January, OCI announced it would end its Global Depository Receipts (GDRs) programme in the London Stock Exchange as the company planned to relocate from Cairo to Amsterdam under the auspices of OCI NV. Holders of the firm's ordinary Egypt-listed shares had the option of taking cash or OCI NV shares.
Also on Tuesday, OCI announced a consolidated net income for 2012 of $259.5 million, representing a 62 percent drop from 2011.