Current and non-current provisions are as follows:
| not included | AUGUST 31, 2024 | AUGUST 31, 2023 | ||
|---|---|---|---|---|
| (in million euros) | CURRENT | NON-CURRENT | CURRENT | NON-CURRENT |
| Reorganization costs | 17 | — | 19 | — |
| Employee claims and litigation | 19 | 26 | 19 | 23 |
| Tax and social security exposures | 5 | 15 | 13 | 16 |
| Contract termination and loss-making contracts | 3 | 38 | 3 | 22 |
| Client/supplier claims and litigation | 7 | 9 | 10 | 13 |
| Negative net assets of associates* | — | 6 | — | 7 |
| Other provisions | 15 | 14 | 15 | 29 |
| TOTAL PROVISIONS | 66 | 108 | 79 | 110 |
* Investments in companies accounted for using the equity method that have negative net assets (see note 8).
During Fiscal 2021, the subsidiary Sodexo do Brasil Comercial received a tax reassessment notice mainly linked to the tax deductibility of the amortization of goodwill recognized on the purchase of the Company Puras. The reassessment covers the period from 2015 to 2017 and amounts to 225 million Brazilian real, i.e., 41 million euros as of August 31, 2024 (of which 9 million euros in principal and 32 million euros in penalties and late payment interests). In August 2021, the competent administrative Court ruled in favor of Sodexo do Brasil Comercial but the Brazilian tax authorities appealed this first instance decision. In March 2024, the Administrative Court (CARF) has unanimously confirmed the first instance decision in favor of Sodexo do Brasil Comercial. The Federal Tax Administration has already taken note of the decision, without expressing any request for clarification, thus definitively ending the dispute in favor of Sodexo do Brasil Comercial,
In addition, Sodexo and its main competitors have a different interpretation from that of the Brazilian tax administration on the deductibility of PIS/COFINS on certain purchases made at a zero rate. Several proceedings are underway, either at the initiative of the tax authorities, which have notified Sodexo do Brasil Comercial of an adjustment in respect of credits recognized in 2016 of 10 million euros (including penalties and interest for late payment), or at the initiative of the Company, which has filed several claims in the courts. One of these proceedings initiated by Sodexo do Brasil Comercial was suspended, on the initiative of the judge, until the Supreme Court's decision on another company's case. In February 2023, the Supreme Court issued its decision, which was unfavorable to the Group concerned: the judges essentially ruled that ordinary law may provide for limitations on the use of PIS/COFINS credits, provided that such law respects all constitutional principles, in particular equality of treatment of taxpayers and free competition. This decision, which should not be considered automatically unfavorable for the individual cases of each taxpayer, does not affect the appeals filed by Sodexo, which will continue to follow their respective courses. Sodexo do Brasil Comercial believes that it has different and strong enough arguments to ultimately succeed in court on this issue. After consultation with its advisors, Sodexo considers that its chances of success in these proceedings are good and that to date the risk of an outflow of resources associated with the PIS/COFINS credits deducted since 2016 remains unlikely; therefore, no provision has been accounted for in the consolidated financial statements as of August 31, 2024.
On October 9, 2015, the company Octoplus filed a complaint with the French Competition Authority (Autorité de la concurrence) concerning several French meal voucher issuers, including Sodexo Pass France (Pluxee France).
On December 17, 2019, the French Competition Authority ruled against the meal voucher issuers and fined Sodexo Pass France (now Pluxee France), jointly and severally with Sodexo S.A., 126 million euros. This amount was entirely paid by Sodexo Pass France (now Pluxee France) during the previous fiscal years. An asset was recognized as a counterpart of the amounts paid (126 million euros) and reclassified in “Assets held for sale or for distribution” as of August 31, 2023.
Sodexo has lodged an appeal against the decision with the Paris Court of Appeal and the hearing was held on November 18, 2021. On November 16, 2023, the Paris Court of Appeal confirmed the conviction pronounced by the French Competition Authority (Autorité de la concurrence). Contesting this decision, Sodexo then lodged an appeal to the final court of Appeals (Cour de Cassation), and the proceedings are still underway.
Considering the elements mentioned above, Pluxee France recorded during the first semester of fiscal year 2024 a provision for 126 million euros, reclassified in the "Net profit from discontinued operations" line of the consolidated income statement on February 29, 2024.
The separation agreement entered into in the context of the Pluxee spin-off includes a commitment by Pluxee to indemnify Sodexo for any liability or damages related to the above litigation.
Sodexo S.A. received in December 2021 a notification for a proposed tax reassessment concerning fiscal years 2016, 2017 and 2018. Another proposed adjustment notice was issued by the French tax authorities in December 2022 for fiscal years 2019, 2020 and 2021 in order to replicate certain adjustments it had initiated during the previous tax audit.
After consulting its advisors, the Company updated the risk associated with these procedures considering the ongoing discussions with the tax authorities (see note 9.2).
Group subsidiaries can also be subject to tax audits certain of which may result in reassessments. Main disputes are described above. In each case, the risk is assessed by management and its advisors and any charges deemed probable are recorded as provisions or tax liabilities.
The Group is not aware of any other governmental, judicial or arbitral proceedings which are outstanding or threatened and which may have, or have had in the past 12 months, material effects on the Group’s financial position or profitability.
Sodexo is also involved in other legal proceedings arising in the normal course of its business. The Group does not anticipate that any potential related liabilities will in the aggregate be material to its activities or to its consolidated financial position.
