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Good practice in tax management and strategy
Taxation is an important topic for Nestlé and our stakeholders, both in terms of compliance and Nestlé’s approach to Creating Shared Value.
We actively manage, monitor and control our Group tax affairs, and believe it is good practice to voluntarily disclose information about our tax management and tax contributions.
Tax aligned to our business principles
Over several years, we have developed 10 tax management principles and four foundations for our long-term Group tax strategy. The principles and foundations are in line with Nestlé Corporate Business Principles (English - pdf, 4Mb) and are cascaded down to, and monitored across, our organization at Group and Market levels.
These principles and foundations 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 responsible and sustainable planning.
Our 10 tax management principles
… our tax policy and objective are to comply in good faith with the letter and the spirit of all applicable tax laws and obligations in all countries where we operate, across all direct and indirect taxes, as a company and employer, as well as with international treaties and international tax guidelines (OECD).
- As our Group operates and pays taxes in more than 130 countries with very different and fast-changing tax legislations and interpretations, we continually monitor, adjust and improve our tax compliance
- We identify, disclose and fix proactively any compliance gap or error that could happen, or adjustments that could arise upon tax audits and settlements.
- Our Group Effective Tax Rate
- Our total tax contributions at Group and Zone levels and between developed and emerging countries
- We pay the right amount of taxes in the right country.
- Where our actual economic and business activities take place
- Where the business value is created
- In accordance with the way we actually operate our businesses.
- We do not engage in tax evasion, artificial or high-risk transactions
- We do not adopt tax schemes, based on form without commercial substance
- We do not use offshore entities that lack business purpose and substance
- We do not use hybrid instruments and entities that result in tax avoidance, double deduction or double no taxation.
- We use appropriate mechanisms to clear in advance the tax impact of major transactions with relevant tax authorities
- When appropriate, we may engage constructively in expressing our views on the formulation of tax legislation and regulations.
- In terms of adequate personnel, resources, up-to-date expertise, training and systems; and
- By developing tax awareness across Nestlé functions and businesses.
- Within a strong Tax Governance, Reporting and Control Framework, Policies and Guidelines; and
- In accordance with the Group Tax Strategy agreed by the Group Chief Financial Officer and the Executive Board, as well as with the Board and its Committees as applicable.
Nestlé is participating with the B-Team in order to promote Responsible Tax Principles. The B-Team is a collective of business and civil society leaders working to create new norms of corporate leadership. Here is the link to the B-Team Responsible Tax Principles.
Four foundations of our Group tax strategy
- In compliance with laws, The Nestlé Corporate Business Principles and the above Tax Management Principles; and
- Taking into account potential impacts on stakeholders and on our reputation.
- Value creation is about managing responsibly and sustainably our total tax costs of doing business within clear risk parameters and in line with the Group business operations and strategies
- It is not about ‘tax minimization’ or ‘tax optimization’ for the sake of it
- We do not have any performance objective (KPI) based on effective tax rates or tax payments.
- Analyzing and managing the tax impacts of current and future business operations and transactions
- Based on genuine business rationale and with a long-term view of sustainability and predictability
- In the areas of the Group’s business models, its supply and value chains, its structure, its organizations, its assets, its investments and its financing
- By claiming tax benefits, incentives and low tax rates available under applicable laws, as long as they are justified legally and from an economic business standpoint.
- Based on their economic and value contribution (functions, decision making, assets, risks)
- Under market conditions, in line with the ‘arms’ length’ principle and in compliance with local and international laws, including the new OECD ‘Base Erosion & Profit Shifting’ Action Reports
- In a consistent and symmetric way across areas, activities and countries, while recognizing differences in transfer pricing legislation and requirements in some countries and differences in business situations, if any
- That we disclose and explain under all applicable transfer pricing documentation requirements, including the OECD ‘Master File’ and ‘Local Files’, as well as the ‘Country-by-Country Reporting’, that we provide to all qualifying countries through the Swiss Tax Administration
- While recognizing that the Nestlé Group is predominantly decentralized in terms of its structure, organization and operations, yet with globally and regionally managed businesses and functions located in Switzerland and other countries.
Group Tax Control Framework
For many years, we have put in place Group Tax Reporting, within the Group Consolidation Reporting System, with a set of tax packages that every Nestlé Market must comply and provide. As part of this Tax Control Framework, we have implemented a new internal tax certification by which Nestlé Markets have to certify at year-end that they are compliant on the following key points:
- They understand and meet all the Principles of Tax Management
- They meet all the tax obligations, filed all tax returns and pay all taxes on time, both direct and indirect
- They meet all obligations related to transfer pricing, including documentation
- They comply with all tax accounting and reporting obligations.
Country-by-Country Reporting (CbCR)
In compliance with the OECD ‘BEPS’ Actions, Nestlé prepares the Country-by-Country Report (CbCR) for the entire Group and provides it to the Swiss tax authorities. Swiss tax authorities share the Nestlé CbCR with countries that have signed agreements allowing for that exchange. We participate in several initiatives with other multinational companies that support our journey with tax authorities and stakeholders towards improving tax governance and tax transparency.
Effective tax rate and tax payments
Effective tax rate
In 2021, Nestlé incurred CHF 2.2 billion in corporate income taxes worldwide on our Group consolidated profit. This corresponds to a 20.9% effective tax rate on our worldwide profits. The underlying tax rate decreased by 40 basis points to 20.7%, mainly due to the evolution of the geographic and business mix.
Tax payments
Nestlé also pays and collects for governments various taxes through its transactions with suppliers and customers, as well through our own operations across the world.
After the closing of the year, we run a survey on the taxes that we bear and/or collect for governments. This report covers the main countries where we operate. The figures included in this report are estimates, and are not audited. 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’s salary taxes)
- Transactions (customs, VAT, GST, consumption taxes, excise taxes)
- Environment (energy taxes, food taxes, green taxes).
In 2021, Nestlé incurred and collected around CHF 12.6 billion of taxes to the governments in its largest markets. Those markets represent nearly the totality of the Group net sales.
This amount includes CHF 5.1 billion, which was incurred and borne as costs by Nestlé. In addition, Nestlé collected taxes for CHF 7.5 billion on behalf of suppliers, clients, governments and shareholders.
Nestlé employed about 276 000 people. On average, taxes borne and collected on employment amount to CHF 17 000 per employee.
| 2021 in BCHF | Taxes borne | Taxes collected | Total |
|---|---|---|---|
| Profit | 2.3 | 2.7 | 5 |
| Property | 0.1 | 0 | 0.1 |
| Employment | 1.8 | 2.8 | 4.6 |
| Transactions | 0.7 | 2 | 2.7 |
| Environment | 0.2 | 0 | 0.2 |
| Total | 5.1 | 7.5 | 12.6 |
| 2021 in BCHF | Taxes borne | Taxes collected | Total |
|---|---|---|---|
| Europe | 2.6 | 4.3 | 6.9 |
| America | 0.6 | 1.7 | 2.3 |
| AOA | 1.9 | 1.5 | 3.4 |
| Total | 5.1 | 7.5 | 12.6 |
| 2021 in BCHF | Taxes borne | Taxes collected | Total | Employees (FTE) |
|---|---|---|---|---|
| Switzerland | 1 | 2.7 | 3.7 | 8'500 |
| USA* | 0 | 1 | 1 | 38'500 |
| France | 0.4 | 0.3 | 0.7 | 9'200 |
| Brazil | 0.1 | 0.5 | 0.6 | 18'100 |
| China | 0.4 | 0.4 | 0.8 | 24'500 |
| Philippines | 0.2 | 0.1 | 0.3 | 5'300 |
| Germany | 0.3 | 0.2 | 0.5 | 8'000 |
| India | 0.1 | 0.2 | 0.3 | 8'900 |
| Italy | 0.1 | 0.2 | 0.3 | 4'500 |
| Canada | 0.1 | 0.1 | 0.2 | 3'500 |
| Others | 2.4 | 1.8 | 4.2 | 147'000 |
| Total | 5.1 | 7.5 | 12.6 | 276'000 |
* Taxes borne USA: due to prior years tax adjustment
In 2021, the amount of ‘VAT Throughput’ was CHF 21.5 billion. VAT Throughput is the sum of VAT out (to customers) and VAT in (from suppliers). This is an indicator of the volume of VAT (and similar indirect consumption-based taxes), generated and managed by Nestlé worldwide.
Nestlé is a member of the European Business Tax Forum (EBTF). The EBTF is an association of European companies that seeks to provide more transparency in the tax debate.
Every year, the EBTF conducts a study with 40-50 European multinationals to provide tax contribution data to the public. Nestlé has contributed to this joint study (Total Tax Contribution – EBTF).
