Nestlé in society Creating Shared Value and meeting our commitments 2015

Nestlé in society:
Creating Shared Value
Nutrition, health
and wellness
Rural development
Water
Environmental
sustainability
Human rights
and compliance
Our
people
G4-EC1
Taxation
Taxation has been identified by our stakeholders as a material issue for Nestlé. We view the tax we pay as part of
both compliance (business ethics) and Creating Shared Value in the countries where we operate. We believe it is
good practice to disclose information about our tax management principles and key tax indicators and contributions.
Nestlé Group Tax Management Principles
and Foundations of Group Tax Strategy
Over the last years, we have developed 10 Principles of Tax
Management and five Foundations of our long-term Group Tax
Strategy. They are based on the recognition that Tax is an
integral element of our overall corporate social responsibility,
as well as on the fundamental objective of tax compliance and
of legitimate and responsible planning. Those Principles and
Foundations are in line with the Nestlé Corporate Business
Principles and are cascaded down to, and monitored across,
our Tax Organization, both at Group and Market levels.
Nestlé effective tax rate and
tax payments
In 2015, the Nestlé Group incurred CHF 3.305 billion in
corporate taxes worldwide on our Group consolidated profit.
This corresponds to a 28% effective tax rate on our worldwide
profits. By comparison in 2014, Nestlé had a 32.8% effective
tax rate worldwide, while incurring a similar amount of
CHF 3.367 billion in corporate taxes. The decrease in effective
tax rate is due mainly to exceptional accounting expenses
(goodwill impairment, monetary adjustment) that reduced our
net profit in 2014, but which were not tax deductible.
Excluding those exceptional items, the underlying tax rate in
2014 is in line with our tax rate in 2015.
Nestlé also pays and collects for governments various taxes
through its transactions with suppliers and customers, as well
as through our own operations across 197 countries.
After the closing of the financial year, we run a Group Tax
Report on the total taxes that we bear and/or collect for
governments in the main countries where we operate. This
report covers all direct and indirect taxes on profit (corporate
income tax, withholding taxes, etc.), properties (real estate
taxes, stamp taxes), employment (social security charges,
employee salary taxes), transactions (customs, VAT, goods and
services taxes, consumption taxes, excise taxes) and
environment (energy taxes, food taxes, green taxes).
Therefore, we don’t yet have the data for 2015 concerning all
indirect taxes. This report and those amounts are non-audited
and, therefore, are to be taken as best estimates.
In 2014, Nestlé collected and paid CHF 14.7 billion of taxes
to the governments in its largest 53 markets, including
CHF 6.7 billion that were incurred and borne as costs by
Nestlé. Those markets represent nearly the totality of the
Group net sales.
Of the CHF 6.7 billion taxes borne by Nestlé in 2014 46%
were taxes on profit:
• With 43% of that amount incurred in our EMENA Zone,
36% in our AMS Zone, and 21% in our AOA Zone; and
• With 58% of that amount paid to developed countries and
42% to developing countries.
Of the CHF 6.7 billion taxes borne by Nestlé in 2014 54% were
taxes on employment (31%), transactions (18%), properties
(3%) and environment (2%).
The remaining CHF 8 billion were collected and paid to
governments: with 50% of that amount incurred in our
EMENA Zone, 31% in our AMS Zone and 18% in our AOA
Zone; and with 64% of that amount paid to developed
countries and 36% to developing countries.
Finally, we had a Group VAT throughput amount of
CHF 20 300 billion, i.e. for the total of all VAT receivable (on
customers) and VAT payable (to suppliers), as an indicator of
the volume of VAT (and similar indirect consumption-based
taxes) generated and managed by Nestlé worldwide.
The 2015 amounts will be disclosed in our 2016 Annual
Report package.
Tax audits and contingencies
Given our large operations in most countries, we are subject to
regular audits by tax authorities and we actively and openly
cooperate in those audits. We are exposed to uncertainties
about tax treatments and claims by tax authorities for various
activities, on both direct and indirect taxes, including:
• Acceptability of (and compliance with) Group transfer
pricing guidelines;
• Deductibility of expenses (particularly related to intra-Group
transactions) under local tax laws;
• Access to incentives and accelerated deductions granted
under tax laws; and
• Lack of clarity or differences of interpretation of the same
tax laws (by the Group and the tax authority or between
different departments within the tax authorities).
We have established a strong Group tax risk report process to
identify and assess all direct and indirect tax risks and to
validate the adequateness of tax contingencies and provisions,
together with our Statutory Auditor.
At the end of 2015, the average period that corporate tax
filings remained open in Nestlé’s main markets was 4.5 years
(excluding any additional period legally opened in case of
tax fraud).
The major audits undertaken by tax authorities in 2015
have been in Mexico, Italy, Morocco, USA, Germany, France
and Brazil.
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