Alliander’s tax matters
Alliander is very careful to discharge all its tax liabilities and its obligations with respect to subsidies, having due regard to and in view of the role it plays in society. Based partly on the dialogue and cooperation with our stakeholders (both inside and outside the company), we have adopted the following mission with regard to all our activities relating to tax and subsidies:
“We are a committed and reliable taxpaying company that makes a fair contribution to society through the tax which it pays.”
To this end, we have set ourselves a number of goals that we strive to achieve each and every day:
Compliance with all primary and secondary legislation relating to tax and subsidies both at home and abroad.
Transparency concerning the tax payments we make in our financial reporting, such as in the financial statements.
We have an ongoing and open dialogue with internal and external stakeholders regarding our conduct relating to both tax and subsidy matters. Parties to this dialogue include the Dutch Tax & Customs Administration, the Netherlands Enterprise Agency, the Supervisory Board, the Management Board, internal departments such as Human Resources, Regulation, Governance, Risk and Compliance, Legal Affairs and Internal Audit, as well as other internal bodies.
We make an active contribution to awareness and culture within Alliander regarding tax and hold each other accountable for our attitude and conduct as regards the implementation of our tax mission.
As a taxpaying company, Alliander is liable for various taxes, chief among which are corporate income tax, wage tax and VAT. The following chart outlines the main cash flows.
Prudent management of tax risks
Alliander is conscious of tax-related risks. We are always careful to act within the bounds of primary and secondary legislation. The primary objective of our conduct in relation to tax matters will generally reflect Alliander’s involvement in society and will support the company’s operational activities rather than being driven solely by tax implications. This is in line with the Enforcement Covenant under the Horizontal Monitoring (i.e. company self-assessment) arrangements agreed with the Dutch Tax & Customs Administration. Against this background, Alliander strives to reach an advance ruling on potential tax risks by pursuing a constructive and transparent dialogue with the tax authorities. The implementation of our tax strategy also adheres to Alliander’s risk management model. In this context, the Tax Control Framework is also used as a risk mitigating measure.
Current tax-related developments
The effective tax burden in 2017 was 25.7% (2016: 27.5%). This is a smaller gap compared with the standard rate than in the preceding year. It was the combined effect of not recognising the losses reported on our operations in Germany and Belgium (increasing effect), utilising tax breaks available for capital projects (decreasing effect) and expenses that are disallowed for tax purposes (increasing effect). Taxes are paid in the country where the activities are carried on. In the case of Alliander, nearly all the tax is paid in the Netherlands. For the 2017 reporting period, this was an amount of €240 million in direct taxation.
In November 2010, Alliander issued a subordinated perpetual bond loan with a nominal value of €500 million. In the closing two months of 2013, this subordinated perpetual bond loan was redeemed. Under IFRS, an instrument of this kind qualifies as equity. It was assumed that the periodic payments made to the holders of the bonds issued in 2010 would count as deductible interest expense for the purposes of corporate income tax.
To date no agreement has been reached with the Dutch Tax & Customs Administration concerning the tax treatment of these loans. In the ongoing appeal proceedings, the District Court at Arnhem upheld Alliander’s appeal in a ruling dated 20 December 2016. The Tax & Customs Administration has lodged an appeal at the Court of Appeal, which will be heard on 21 February 2018.
Since 1 January 2016, the documentation requirements in the Corporate Income Tax Act 1969 have been changed with the Netherlands implementing the recommendations in Action 13 of the OECD’s Base Erosion and Profit Shifting (BEPS) project. Alliander is covered by the scope of these requirements and has implemented them in order to meet the new requirements in good time.
Considered approach to grant applications
As a large corporation, we also have a responsible approach when it comes to subsidy schemes. We do a lot of innovative work, especially in the context of the energy transition. Various schemes are available for this kind of activity, at international level, at national level and at regional level. We focus on grants that are intended for large corporations rather than those for regional activities. We recognise our responsibility in this area and, at regional level, deliberately leave the field open for other companies to develop smaller sustainability initiatives by only applying for such grants where appropriate.
Developments in the energy market (including greater internationalisation) make tax matters increasingly complex. Alliander’s aim is to maintain the existing status with respect to compliance and to have a stable effective tax burden. Paying our fair share - in the way we attempt to do in conjunction with our stakeholders - remains at the heart of our tax policy.