Darco Water Technologies said it had been notified by its subsidiary, Darco Engineering Taiwan, that it had recently received an additional tax assessments and penalties from the Taiwanese tax authorities amounting to NT$42.8 million (S$1.8 million) and NT$38.5 million respectively.
The additional tax assessments arose from the fraudulent acts committed by the previous management of the Taiwan subsidiary and are for the financial years of assessment 2006, 2007, 2008 and 2009.
The penalties are a consequent result of the additional tax assessment.
The legal suit against the former management of the Taiwan subsidiary is still ongoing.
Darco Water said it had been advised that the claims are disputable and will vigorously appeal and contest against them on the following grounds:
* Any penalties imposed are unreasonable because the matter arose from the company's voluntary disclosure;
* The excess amount imposed by the Taiwan tax authorities is deemed to be excessive; and
* Any additional tax payable, is only about NT$4 million.
The board said that company has adequate finances to support its operations and there will be no material impact to the financial results of the group for 2013.
"However, if the claims are proven to be valid, there could be a material impact on the future results of the group depending on the final quantitative amount of the claims," it warned.