Terrafame’s commitment to accountability also extends to tax matters
Terrafame Ltd publishes information on its tax status in 2018. The report is based on the guidance on tax reporting issued on 1 October 2014 by the Government Ownership Steering Department of the Prime Minister’s Office.
Terrafame Ltd was entered into the Trade Register on 5 June 2015 under the name Terrafame Mining Ltd. The company's name was changed to Terrafame Ltd in August 2015. Terrafame commenced its actual operations on 15 August 2015 after having acquired the business of Talvivaara Sotkamo Ltd’s bankruptcy estate as well as the related inventories and fixed assets. The financial period 1 January–31 December 2018 is the company's fourth financial period and its third full year of operation.
Terrafame is part of Finnish Minerals Group. Finnish Minerals Group, which held 77.0% of Terrafame’s shares at the end of the year, is a company operating under the auspices of the Ministry of Economic Affairs and Employment. The mission of this special-purpose company is to develop the Finnish battery and mining industry.
This report includes information about the management of tax matters at Terrafame and an itemisation of taxes paid to Finland. Terrafame only operates in Finland and does not, therefore, pay taxes in other countries.
Terrafame has an important social duty and a regional role to play especially in the Kainuu region in Finland. In the second half of 2018, Terrafame’s ramp-up reached the annual production level of 30,000 tonnes of nickel, which was set as the target for the ramp-up in the autumn of 2015. The number of Terrafame employees increased from 650 persons at the end of 2017 to 667 persons at the end of 2018.
In addition to its own employees, 570 people through around 70 subcontractor companies worked full-time at the industrial site at the end of 2018.
Strategy and principles for the management of tax matters
Terrafame is focused on sustainable, safe, and financially profitable operations. The business is based on three cornerstones: safety, efficiency and commitment.
Terrafame also acts responsibly from the perspective of corporate governance. The company and its personnel are committed to observing all applicable laws and regulations in their work.
The company is also committed to implementing corporate social responsibility in accordance with the state ownership policy. As an unlisted company, Terrafame observes, as applicable, the Finnish Corporate Governance Code (2015) for listed companies issued by the Securities Market Association.
Terrafame fulfils its obligations to pay and report taxes in a timely manner, and their objective is to resolve any significant tax issues in advance in cooperation with the tax authorities. Terrafame strives to minimise tax-related uncertainties and to respond promptly to any regulatory changes. The company ensures the professional competence of personnel who deal with tax issues and, if necessary, uses the best possible external expertise to supplement their personnel’s know-how.
Organisation and management of tax matters
The division of responsibilities in tax matters complies with Finnish company legislation. The most important tax-related matters are dealt with by the company’s Board of Directors.
The CEO of Terrafame, together with the company's CFO, is responsible for organising tax matters. In 2018, the company engaged external experts in the management of tax matters and focused on active cooperation with the tax administration of Finland.
The operations of Terrafame are guided by principles that emphasise responsibility. The company does not plan its operations with the aim of gaining tax benefits, and it has no operations abroad. The company strives to investigate the tax consequences of crucial business decisions in advance and operate in an economically justified manner, provided that their practices are acceptable from the perspective of taxation.
The report is based on financial statements and accounting documents drawn up in accordance with the Finnish Accounting Act (1336/1997 of 30 December 1997). The reported taxes are based on account-specific and voucher-specific accounting. Terrafame reports its taxes in thousands of euros.
The report excludes mandatory insurance premiums that are included in salary costs. These insurance premiums, which are directly related to salaries, have been dealt with as direct salary costs, due to the nature of these kinds of insurance. The company does not report small amounts of value-added tax included in foreign travel and training costs. Itemisation of taxes paid by Terrafame Ltd Terrafame's first two years of operation showed a deficit, due to the production ramp-up. For this reason, the company does not yet have any taxable income. However, a considerable amount of tax expenses have accumulated due to the energy and fuel taxes related to the operations. In addition, the company has paid taxes related to the acquisition and ownership of assets, as normal.
Key figures of Terrafame Ltd 2018 and 2017
|Earnings before taxes||-6,171||-9,601|
|Average number of personnel during the financial year||669||694|
Tax categories of Terrafame Ltd 2018 and 2017
|Direct taxes paid||921||1,146|
|Asset transfer taxes||43||4|
| Employer's social security
|Indirect taxes paid||4,919||5,654|
|Electricity taxes, net||314||1,282|
|Electricity taxes, return||-2,292||-1,460|
|Insurance premium tax||316||331|
|Fuel taxes, net||4,282||4,019|
|Fuel taxes, return||-696||-634|
|Taxes collected and accounted for||14,340||-22,557|
|Tax withheld in advance||7,649||7,156|
|Value-added tax, net||6,691||-29,713|
|Value-added tax, sales||78,299||47,398|
|Value-added tax, purchases||-71,607||-77,111|
|Ratio of tax payments to net sales||6.19%||-7.16%|
On 31 December 2018, Terrafame had unrecognised deferred tax assets of approximately EUR -31.7 million, which consisted of the estimated taxable result for the financial year 2018 (EUR 4.5 million), the profit/loss for the financial year 2017 (EUR 1.1 million), the confirmed loss for the financial year 2016 (EUR -20.4 million), and the confirmed loss for the financial year 2015 (EUR -16.9 million).
Corrected figures in the table Tax categories of Terrafame Ltd 2018: indirect taxes paid. net electricity taxes and electricity taxes, total and ratio of taxpayments to net sales. (16 Apr 2019).