Tax principles we follow

Compliance

Taxes are paid in accordance with all relevant rules and regulations in the countries in which we operate. We aim to comply with both the spirit and the letter of the law. Compliance is monitored through a Tax Control Framework. Additionally, also in managing tax affairs, our employees must adhere to the AkzoNobel Code of Conduct.

 

Business rationale

Tax follows business, and profit is allocated to countries in which value is created, in accordance with domestic and international rules and standards (such as the OECD Guidelines) and applying the at arm's length principle.

We do not seek to avoid taxes through “artificial” structures in tax haven jurisdictions.

 

Relationship with tax authorities

We seek an open and constructive dialog with tax authorities on the basis of disclosure of relevant facts and circumstances. We aim to enhance clarity and upfront certainty around tax.

 

Transparency

We are transparent about our approach to tax and our tax position. Disclosures are made in accordance with the relevant domestic regulations, as well as applicable reporting requirements and standards such as IFRS.

Tax update 2020

Effective tax rate and Cash tax rate 

The reported effective tax rate (ETR) for the year 2020 is 26.2% (€241 million). The weighted average statutory income tax rate based on the geographic spread of AkzoNobel’s activities is 24.6%. The difference between this statutory rate and the effective rate is explained in the following table:

2019

25.0

2020

25.0

2019

(2.2)

2020

(0.4)

2019

22.8

2020

24.6

2019

(1.0)

2020

(1.2)

2019

3.2

2020

1.8

2019

5.8

2020

(0.1)

2019

0.4

2020

0.6

2019

(0.2)

2020

0.2

2019

(1.7)

2020

(0.3)

2019

29.3

2020

26.2

In the table below the effective tax rate is shown for the years 2019 and 2020. In the annual report only the effective tax rate for continued operations is shown. As the cash tax paid in the cash flow statement is on a total basis (including discontinued operations), we also show the effective tax rate on a total basis in the table below.

2019 in € millions

785

2020 in € millions

919

Calculated average in € millions

852

2019 in € millions

(230) 

2020 in € millions

(241)

Calculated average in € millions

(235.5)

2019 in € millions

29.3%

2020 in € millions

26.2%

Calculated average in € millions

27.6%

2019 in € millions

806

2020 in € millions

920

Calculated average in € millions

863

2019 in € millions

(229) 

2020 in € millions

(249)

Calculated average in € millions

(239)

2019 in € millions

28.4%

2020 in € millions

27.1%

Calculated average in € millions

27.7%

2019 in € millions

(184)

2020 in € millions

(187)

Calculated average in € millions

(185.5)

The above amount of cash taxes paid of €187 million includes €22 million Dutch dividend withholding tax for the account of AkzoNobel on the executed share buyback program. 

The difference between the book tax rate and the amount of tax paid in a given year is mainly caused by the following factors: 

 

Deferred tax: 

- the creation or usage of tax losses and tax credits 

- certain cost or income elements may be included for IFRS results in another year than for taxable results 

Timing differences tax payment 

- the tax liability of a certain year is generally partly paid within the year, and partly in the next year

 

Taxes borne and paid by AkzoNobel

In the countries where AkzoNobel is operating, we are contributing to society in several ways. We pay to suppliers, employees, capital providers and governments. AkzoNobel can only operate in countries if certain conditions are fulfilled. For example, educated people are needed to run and manage our operations, and a logistical infrastructure is needed in order to transport our goods. By paying to governments, we contribute to the general funds out of which these conditions can be financed. 

We provide our country-by-country-report to the tax authorities in the Netherlands, in line with the Base Erosion and Profit Shifting (BEPS) Plan as initiated by OECD and enacted into Dutch legislation. 

Corporate income taxes and withholding taxes paid and borne in 2020 by AkzoNobel worldwide were €187 million. 

The following overview shows a breakdown of the 2020 revenue, the taxes borne and paid and the number of AkzoNobel employees for its key countries and regions:

Taxes paid in € millions

(22)

Total revenue in € millions

342

Number of employees as pe YE

2,300

Taxes paid in € millions

(1)

Total revenue in € millions

838

Number of employees as pe YE

3,000

Taxes paid in € millions

(12)

Total revenue in € millions

372

Number of employees as pe YE

1,200

Taxes paid in € millions

(1)

Total revenue in € millions

140

Number of employees as pe YE

900

Taxes paid in € millions

(45)

Total revenue in € millions

2,276

Number of employees as pe YE

7,100

Taxes paid in € millions

(29)

Total revenue in € millions

1,205

Number of employees as pe YE

4,500

Taxes paid in € millions

(40)

Total revenue in € millions

1,139

Number of employees as pe YE

5,800

Taxes paid in € millions

(2)

Total revenue in € millions

1,019

Number of employees as pe YE

2,700

Taxes paid in € millions

(29)

Total revenue in € millions

697

Number of employees as pe YE

2,600

Taxes paid in € millions

(7)

Total revenue in € millions

502

Number of employees as pe YE

2,100

Taxes paid in € millions

(187)

Total revenue in € millions

8,530

Number of employees as pe YE

32,200

* Including Dutch dividend withholding tax for account of AkzoNobel on the executed share buyback program. 

The taxes paid and borne include corporate income tax and withholding tax paid in 2020. This may include tax payments or refunds relating to previous years, whereas taxes and refunds related to the year 2020 may only have a cash impact in future years. The withholding tax is reported by the countries to which the taxes were paid. 

As already mentioned above, the actual amount of tax paid can differ from the tax expenses as reported in the 2020 annual report. The difference between the actual tax paid and tax expense reported are caused by various items such as deferred tax stemming from timing differences or loss carryforwards. 

Besides the indicated taxes, AkzoNobel also pays and bears other taxes like custom and excise duties, sales taxes and environmental/energy taxes. These taxes are not included in the overview above. Furthermore, the presence of AkzoNobel within countries also leads to other material tax revenues than those that are borne by AkzoNobel, like the tax withheld from customers (VAT) and employees (wage tax).