Sunterra To Pay $3 Million to European Tax Authorities For Unpaid Taxes

LAS VEGAS, NV -- Sunterra Corporation (PINKSHEETS: SNRR) today announced that it has concluded its analysis of unpaid withholding taxes, income taxes and value-added taxes related to transactions conducted by its European subsidiary during calendar years 2002 through 2006. As a result, the company will voluntarily pay approximately $3 million to the European tax authorities in the next several weeks and has established a reserve for probable tax liabilities of approximately $6.8 million. Therefore, the total amount of taxes to be paid and additional reserve amounts to approximately $9.8 million.

Sunterra previously disclosed that its European operations underwithheld certain employment-related taxes in Spain. The $3 million of payments plus the $6.8 million reserve is in addition to the $4 million voluntarily paid to Spanish tax authorities in May 2006. The company is preparing to make payments of $3 million to European tax authorities for unpaid withholding taxes, income taxes and value-added taxes and estimates that it will be required to pay $800,000 in interest and surcharges related to this payment. The $800,000 estimate is included in the $9.8 million total.

As previously disclosed, the company continues to assess a number of issues generally confined to compliance, deferred maintenance and resort licensing in Europe. Additionally, the company is reviewing the terms under which certain European properties were transferred into a European trust. Depending upon the results of this review, the company may be required to account for sale of certain trust points as operating leases. These issues could have a material adverse effect on Sunterra Europe. As previously announced, Sunterra Europe will be reflected as a discontinued operation in the company’s financial statements for the fiscal year ended September 30, 2006, and the company has concluded that its investment in Sunterra Europe will be substantially impaired.

The company previously announced that it intends to restate its financial results for the fiscal years ended December 31, 2002 through September 30, 2005 (and related interim periods), and for the fiscal quarter ended December 31, 2005. Sunterra has not filed financial statements for the fiscal quarters ended March 31, 2006, June 30, 2006 and December 31, 2006, and for the fiscal year ended September 30, 2006.

About Sunterra

Sunterra is one of the world’s largest vacation ownership companies with more than 324,000 owner families and nearly 100 branded or affiliated vacation ownership resorts throughout the continental United States and Hawaii, Canada, Europe, the Caribbean and Mexico. Sunterra news releases, as well as additional news and information on the company, can be found at www.sunterra.com.