Deutsche Post of Germany announced on Tuesday it would pay 516 million euros ($645 million) in back taxes for the period from 1998 to 2010.

"The German financial authorities have issued a notice of assessment that will result in an additional value-added tax payment," the German postal giant said in a statement.

The decision came after a review of the period in question when the VAT law for postal services was revised, meaning that a number of services that were previously exempt later became liable to VAT.

Deutsche Post explained the back taxes would boil down to a 180-million-euro charge against pre-tax profit and a charge of 265 million euros on bottom-line net profit for the second quarter.

Drawing the battle lines elsewhere

While the payments would certainly pare second-quarter earnings, Deutsche Post would not revise its revenues forecast for the whole of 2012, the group said on Tuesday. The full-year earnings target was put at 2.5 to 2.6 billion euros, as back tax payments would be cushioned by reserves the company had already set aside.

Deutsche Post Chief Executive Frank Appel said his company did not see eye to eye with financial authorities in Berlin, but agreed to pay up in order to avoid any protracted litigation.

Recently, the group paid back 298 million euros to the German Finance Ministry as a result of a decision by the EU Commission. Brussels had accused the postal giant of collecting too many subsidies for delivery services and civil servant pension schemes. Deutsche Post has already appealed against the payment at the European Court of Justice.

hg/mll (dapd, Reuters, AFP)