Ciech S.A.

Legal Proceedings Report • Jan 7, 2020

Text of the Report:

The Management Board of CIECH S.A. (hereinafterreferred to as the "Issuer" or "CIECH")herewith informs that on 7 January 2020, the attorney for a subsidiaryof the Issuer - CIECH Soda Polska S.A. (hereinafter referred to as the "Subsidiary"or "CSP"), i.e. the legal successor of Cerium Finance Sp. zo.o. (hereinafter referred to as "Cerium Finance"),receivedthe decision of the Head of the Małopolskie Province Customs and TaxOffice in Krakow(hereinafterreferred to as the "Decision of the 2ndInstance"and the "2ndInstance Authority" respectively)of 24 December 2019. Following an appeal submitted by the Subsidiary,the 2ndInstance Authority upheld the decision of the Headofthe Małopolskie Province Customs and Tax Office in Krakow(hereinafter referred to as the "1stInstance Decision") of 30 August 2019, defining the amount of thetax liability with respect to tax on goods and services for December2014 in the amount of PLN 25,731,601, of which the amount of thedisputed liability arising from the 1stInstance Decision isPLN 25,277,408 (the "Liability").

The Decision of the 2ndInstance is dueand payable, and could make it necessary to pay the amount of theLiability together with interest once again, which as at the date ofpublication of this report amounts to PLN 10,011,000, although theamount of the Liability has already been paid to the competent taxoffice in connection with the correction of the VAT settlement for July2018, submitted in accordance with the received individualinterpretation (hereinafter referred to as the "Correction").Such VAT amount to be paid again will be recovered by the Subsidiary, atthe latest, after the end of administrative and court proceedings, ifany (for December 2014), or after the end of overpayment proceedings, ifany, for July 2018.

In order to avoid payment of the same amount of theLiability once again, the Subsidiary and its tax advisors are analysing:

1.1.the possibility of crediting the amountof VAT, paid as a result of the submitted Correction, towards theLiability arising from the Decision of the 2ndInstance andthe interest due on such Liability, and

2.2.the impact of this action on the courseof the tax proceedings.

Should the overpayment proceeding prove to beeffective, the Subsidiary would be required to additionally pay approx.PLN 7,900,000 in respect of the interest and VAT.

The Issuer informed about the pending proceedings inits current reports:

1.No.26/2019 of 17 July 2019

2.No.39/2019 of 11 September 2019.

Furthermore, the Issuer informed about the pendingproceedings and the amount of the potential tax liability in theconsolidated statements of the CIECH Group. In the extended consolidatedfinancial statements of the CIECH Group for the three quarters of 2019,these proceedings are described in Note 3.12, in the section "Audits oftax settlements in the CIECH Group", in the paragraph "VAT audit forDecember 2014 at Cerium Finance Sp. z o.o."

The Subsidiary and its advisers disagree with theposition of the 2ndInstance Authority; accordingly, theSubsidiary intends to lodge a complaint against the Decision of the 2ndInstance with the Provincial Administrative Court in Krakow. TheSubsidiary's position is based, among others, on the fact that theSubsidiary and Cerium Finance obtained tax interpretations issued by theDirector of the National Tax Information Office, which they compliedwith when settling the VAT correction in the month of receipt of thecorrecting invoice, i.e. July 2018, and not in its settlements forDecember 2014 as indicated by the 2ndInstance Authority inthe Decision of the 2ndInstance Authority.