Current reports

Receiving by the subsidiary the opinion of tax advisors regarding the findings of the Texas Comptroller of Public Accounts office and deciding to proceed with the case

Current Report No 31/2018

 

Legal basis: Article 17(1) of MAR – inside information

With reference to the delayed current report No. 30/2018 published on August 21, 2018, the Management Board of Medicalgorithmics S.A. (hereinafter the “Company”, the “Issuer”) informs that on 20 August 2018, the Issuer’s subsidiary – Medi-Lynx Cardiac Monitoring LLC (hereinafter “Medi-Lynx”) received the opinion of tax advisers commissioned after Medi-Lynx had received the tax audit report (hereinafter the “Report”) from the Texas Comptroller of Public Accounts office (hereinafter the “Office”). The audit was carried out by the Office in relation to limited sales, excise and use tax paid in Texas, for the period from July 1, 2014 to December 31, 2017.

According to the Opinion:

– part of the identified tax liabilities in the amount of USD 395,951.97 (“Liability A”) together with interest as of August 14, 2018 in the amount of USD 35,399.92, i.e. a total of USD 431,321.89, is payable and should be paid,

– the vast majority of tax liabilities identified in the amount of USD 1,310,058.02 (“Liability B”) together with interest as at August 14, 2018 in the amount of USD 117,025.93, i.e. a total of USD 1,427,083.95, according to tax advisors, is not due as it has been charged from the patient’s ECG signal monitoring services and those services are not taxable. The exclusion stems directly from the laws of the state of Texas, where it is stated that “All sales of information coming mainly from laboratory or medical examination, tests or any similar method of direct observation of physical phenomena shall not be taxable.” Recording of patients’ ECG signal from the PocketECG monitoring device is, in the opinion of tax advisers, information obtained from the results of medical research. Thus, the taxation of services within monitoring with the PocketECG device is, according to the Opinion, an obvious mistake.

The opinion confirmed Medi-Lynx’s position on significant irregularities in the Office’s findings. In connection with the aforementioned, having analyzed the Opinion and in accordance with the recommendation of tax advisors, also having consulted the Company, on August 21, 2018 Medi-Lynx decided as follows:

– Medi-Lynx shall immediately settle the Liability A with interest and establish a provision for this liability charging its financial result in the financial statement for the first half of 2018.

– Medi-Lynx shall file the Statement of Grounds and Request for Redetermination regarding the part related to the Liability B. Filing the statement shall suspend the enforceability of the provisions contained in the post-audit report. Due to significant doubts as to the correctness of the Office’s findings regarding the Liability B, Medi-Lynx does not intend to establish a provision regarding this liability that would impose its financial result. Interest is accrued until the date of payment of the tax liability.

The first stage of the appeal procedure is before public administration bodies. This stage may end with a settlement or a decision issued by the Office. Such a decision becomes enforceable, but the entity affected by it has the right to bring the case to court.

The company will be providing information on significant stages of the appeal proceedings in separate current reports.