Management believes that it has adequately provided for tax liabilities based on its interpretation of tax legislation and official pronouncements. However, the interpretations of the relevant authorities could differ and the effect on these consolidated interim condensed financial statements, if the authorities were successful in enforcing their interpretations, could be significant. ii. Russian Federation

The taxation system in the Russian Federation continues to evolve and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are sometimes contradictory and subject to varying interpretation by different tax authorities.

Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year generally remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open longer. Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive and substance-based position in their interpretation and enforcement of tax legislation.

In addition, a number of new laws introducing changes to the Russian tax legislation have been adopted. In particular, starting from 1 January 2015 changes aimed at regulating tax consequences of transactions with foreign companies and their activities were introduced, such as the concept of beneficial ownership of income, etc. These changes may potentially impact the Group's tax position and create additional tax risks going forward. This legislation is still evolving and the impact of legislative changes should be considered based on the actual circumstances.

These circumstances may create tax risks in the Russian Federation that are substantially more significant than in other countries. Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the tax authorities and courts, especially due to reform of the supreme courts that are resolving tax disputes, could differ and the effect on these consolidated interim condensed financial statements, if the authorities were successful in enforcing their interpretations, could be significant. iii. Republic of Cyprus

Operations of the Group in Cyprus are mainly limited to provision of intra-group financing, transactions related to the Assofit legal case and various management activities. Transactions performed by the Cyprus entities of the Group fall within the jurisdiction of Cyprus tax authorities. The Cyprus tax system can be characterised by numerous taxes, legislation may be applied retrospectively, and can be open to wide interpretation. VAT and income tax declarations are subject to review and investigation by authorities that are enacted by law to impose severe fines, penalties and interest charges. A tax year remains open for review by the Tax department during the six subsequent calendar years, however under certain circumstances a tax year may remain open longer.

Additionally, a new transfer pricing legislation was enacted in Cyprus from 30 June 2017, which requires entities to conduct intra-group financing transactions on the arm's length principle (a principle under which transactions are performed at market rates, as would have been performed between unrelated entities). The legislation requires taxpayers to prepare and submit to the tax authorities transfer pricing study documents justifying margins applied to the intra-group financing. The compliance of margins applied to the arms' length principle could be subject to scrutiny on the basis of unjustified tax benefit concept. Given the fact that the above rule has been in force for a limited period of time, currently, there is no established practice of its application by the tax authorities, and there can be no assurance that the tax authorities' interpretations of the approaches will concur with those used by the Group, which could result in the accrual of fines and penalty interest on the Group.

During the prior years, the Group incurred certain foreign legal expenses, where the VAT accounted for on these expenses was fully claimed. Management believes that the Group properly claimed the VAT accounted for on these expenses, on the basis of the plans to further collect reimbursement of the said expenses, being purely of legal nature, from the respective parties in full.

Management believes that it has adequately provided for tax liabilities based on its interpretation of tax legislation, official pronouncements and court decisions.

14 Related party transactions

(a) Control relationships

The Group's largest shareholders are Retail Real Estate OU, Dragon Capital Investments Limited, Deltamax Group OU, Mr. Rauno Teder and Mr. Jüri Põld. The Group's ultimate controlling party is the Estonian individual Mr. Rauno Teder.

During the year ended 31 December 2020, Hillar Teder transferred his equity interest in Retail Real Estate OU to Rauno Teder. As a result, Rauno Teder, who already had held 15.92% of the issued voting rights of the Parent Company (7.48% - directly and 8.34% through Deltamax Group OU), acquired interest of 55.04% in the Parent Company (though RRE), thus increasing his aggregate interest to 70.86% of the Parent Company.

(b) Transactions with management and close family members

Key management remuneration

Key management compensation included in the consolidated condensed statement of profit or loss and other comprehensive income for the six months ended 30 June 2021 is represented by salary and bonuses of USD 293 thousand (unaudited) (six months ended 30 June 2020: USD 252 thousand (unaudited)).

Directors' interests

The direct and indirect interest of the members of the Board in share capital of the Company as at 31 December 2020 and 30 June 2021 and as at the date of signing of these consolidated interim condensed financial statements is as follows: 


Name                       Type of interest        Effective shareholding rate 
Mr. Jüri Põld              Direct shareholding     7.07%

(c) Transactions and balances with entities under common control

Outstanding balances with entities under common control are as follows: 


                                                                                    30 June 2021         31 December 
                                                                                    (unaudited)          2020 
(in thousands of USD) 
 
Short-term loans receivable                                                         11,344               11,208 
Trade receivables                                                                   1                    1 
Other receivables                                                                   8,160                8,160 
Provision for impairment of trade and other receivables and loans receivable from   (19,503)             (19,366) 
related parties 
 
                                                                                    2                    3 
 
Long-term loans and borrowings                                                      21,420               21,420 
Short-term loans and borrowings                                                     9,727                11,630 
Trade and other payables                                                            214                  218 
Advances received                                                                   25                   24 
 
                                                                                    31,386               33,292

Expenses incurred and income earned from transactions with entities under common control for the six months ended 30 June are as follows: 


                       2021        2020 
                       (unaudited) (unaudited) 
(in thousands of USD) 
 
Interest expense       (1,502)      (1,553)

All outstanding balances with related parties are priced on an arm's length basis and are to be settled in cash in accordance with contractual terms. None of the balances are secured.

15 Subsequent events

Subsequently to the reporting date, the maturities of certain amounts of accrued interest on loans and borrowings and other payables, that were presented within current liabilities as at 30 June 2021, were changed to 1 August 2023, because of non-execution of the contractual rights of the lenders to require settlement of these amounts by 1 August 2021. As at 30 June 2021, such accrued interest is represented within loans and borrowings from related parties amounting to USD 2,717 thousand, loans and borrowings from third parties amounting to USD 2,401 thousand and other current liabilities amounting to USD 3,008 thousand. This has improved the liquidity position of the Group.

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ISIN:           CY0102941610 
Category Code:  IR 
TIDM:           ARO 
LEI Code:       213800F8AMPULEKXFX22 
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited reviews 
Sequence No.:   122690 
EQS News ID:    1235157 
 
End of Announcement  EQS News Service 
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September 22, 2021 07:00 ET (11:00 GMT)