The following information and titles are provided following HMRC guidance dated 24 June 2016. This statement is prepared in accordance with the requirements of the United Kingdom Finance Act 2016, Paragraph 19(2) of Schedule 19 in relation to the financial year ended 31 December 2017.
The Company Tax Policy is detailed below:
The Group Tax Policy is to guarantee the complete fulfillment of each and every tax that affects the different group companies’ operations, in every jurisdiction where these entities conduct businesses.
In applying this Policy it is of the utmost importance that the Group activities comply with local and foreign tax laws regarding corporate taxes, value added taxes, alcohol taxes, and any other activity that may cause a tax liability, and to display a total and complete transparency regarding the communication between the Group and the local tax authorities. In the context of direct taxation, the Group Policy is to maintain an effective tax rate that increases shareholder value, taking into account financial and reputational risks.
The Group can participate in tax planning to structure its operations and finance in a tax efficient manner, but with the planning always based on the business reality of its activities. Therefore, it will always be required that every transaction has a business basis for its implementation. The Company adheres to the OECD’s arm’s length principles regarding transfer prices, meaning that intercompany transactions will be dealt according to market prices. For this, third party consultants review and audit every intercompany transaction yearly, making sure that these comply with arm’s length principles in every jurisdiction where the Group operates.
An internal cross-functional Transfer Prices Committee operates within the company whose objective is to periodically review and monitor results in every jurisdiction with the objective of complying with transfer pricing regulation.
The Group accrues tax provisions on its books based on tax estimations. These estimates may require analysis and interpretation of various tax laws.
The CFO is the responsible of keeping the Board of Directors informed of all relevant developments regarding the Group’s tax situation, especially of any tax or reputational risks that may arise.
The Group’s Tax Department will oversee the tax compliance of all subsidiaries and must be timely informed of any dispute that may arise and/or of any tax audit initiated by tax authorities in any jurisdiction. This information must be channeled by, for foreign Group subsidiaries, by the local tax supervisor.
Approach to risk management and governance in relation to taxes in the United Kingdom.
-Risks in the United Kingdom related to business changes and increased complexity.
The Group does business in more than 140 countries around the world. The business in the UK plays a big role in the overall Group’s business.
The tax risks in the UK related to the business size includes collection of taxes and payment of special taxes, and VAT.
Carrying out business at an international level entails additional complexity and risks in relation to local taxes and taxation related to transfer pricing including goods, services and financing done between Group’s companies.
-Tax Risks Management Governance framework
The CFO is responsible for the Group’s Tax Policy. Locally, this policy is overseen by the Finance Director.
Regarding direct taxation, the Policy implementation falls under the responsibility of the Financial Controller of each subsidiary. Regarding special taxes and VAT in the UK, this task falls under the Finance Director, his team and third party consultants.
The Finance Controller informs upper management of tax issues, who then informs the CFO.
The Group operates within an integrated governance approach, aligned with the ‘three line defense’ model.
The First Line of Defense is the existence of controls, policies, procedures and corporate training.
The Second Line includes the involvement of Corporate Governance work teams, third party advisors and financial oversight, in providing a clear understanding to the whole Group with the objective of promoting an appropriate corporate and personal attitude.
The Third Line consists in Internal Auditing. Internal Auditing has in place a continual internal auditing program which reviews all the business units and their processes that are relevant for tax purposes.
Specifically to UK taxes, if it is determined that there are intrinsic risks in terms of calculation, collection and payment of special, VAT and corporate taxes a qualified third party will be hired for their advice and expertise mitigating said risks.
To manage Transfer Pricing risks, annually the Group carries out studies to identify arm’s length prices for its cross border business activities regarding selling of goods and services. These studies are done in accordance of what might be requested by the UK or other authorities.
-Oversight of the Board and its involvement
During the results reviews of the Company presented by the Management to the Company´s Board, tax related items and associated risks are included in the analysis. These normally consider compliance with the Transfer Pricing Policy and of relevant taxes in the UK (see section Tax Policy).
Group’s position towards tax planning (concerning UK taxation)
-Code of Conduct
The Group’s Code of Conduct requires that all decisions taken by employees must be in accordance with the Group’s Values, ethical and legal
-Why tax planning assessment is provided by third parties
The UK Tax Code is complex and changes constantly. The external tax advisory is hired to assure a correct analysis of the transactions so their implications are fully understood and that all taxes are filed and paid accordingly.
-Reasons for Tax Planning
The corporate tax rate in the UK is relatively low compared with other tax jurisdictions where the Group operates. Given this, there is no approach to avoid or reduce taxes paid in the UK.
Acceptable UK Tax Risk Level
-Explanation for internal governance in terms if there’s a fixed acceptable tax risk, and if this is influenced by interested parties.
The Company´s Board has no pre-established rules given acceptable risk levels, but, in practice, when serious questions arise about any transaction tax treatment, The Company will proceed only to the extent that this does not imply an exposure to financial tax risks, damage to the brand image in the eye of the public. Thus, the Company´s Board is conservative in these matters and operates based on the advice given by one or more of the leading tax consultancy agencies that the transaction in question should have the expected result.
The Group’s approach to HRMC relations
-Complying with the requirement of cooperating with the HMRC
We have an open, honest and collaborative working relationship with HMRC which includes having a constructive regular dialogue across all taxes; making accurate, full and timely disclosures; seeking for advice or clearance whenever the tax treatment is uncertain; notifying as soon as it becomes apparent that errors or mistakes have been made and responding to queries and information requests promptly.