Group Shared Policy on Global Tax
Established on : April 1, 2016
Revised on : April 1, 2017
Revised on : April 1, 2018
Background and Purposes
Based on its Code of Conduct, Ajinomoto Group shall be committed to comply with the laws and their related regulations in all countries in which it operates. As a matter of course, Ajinomoto Group shall comply with the tax laws in all countries and conduct entire business activities in accordance with taxes guidelines published by international organizations such as the OECD.
As a multinational company, Ajinomoto Group should realize that each country has different rules and tax systems, which has been more complex to deal with, and consider the interest of various stakeholders such as governments, tax authorities and shareholders.
In addition, in order to maximize the shareholder value, Ajinomoto Group is required to minimize the tax risk involved. Accordingly, Global Tax Group will confirm the tax positions of Ajinomoto Group entities periodically and make its best efforts to apply for tax benefits and reduce unnecessary tax expenses and as a result Global Tax Group would like to establish a mechanism to share our “best practices” within our group.
Based on these principles, Ajinomoto Group established its policy to comply with such laws and regulations.
1. Compliance with Tax Law
At whole time, Ajinomoto Group will act in accordance with all applicable direct and indirect tax laws in the territories in which it operates, as well as be guided by relevant international standards (e.g., OECD, EU, UN Guidelines).
2. Minimization of Tax Risk
In order to maximize the shareholdersʼ return, one of the ultimate purposes is to minimize the tax risk under the accelerating pace of globalization in conjunction with the rapid pace of legislative and regulatory changes.
3. Maximization of Consolidated Free Cash Flow
Under above conditions and in order to achieve its planned business targets, Ajinomoto Group aims at the maximization of the Profit After Taxes, ROE, EPS, Free Cash Flow and hence Shareholder Value, advising its management about the strategies and schemes on the minimization of the tax cost.
4. Part of Business Activities
Business model optimization without taking into account taxation will decrease the value of the business. At the same time tax planning is driven by the business. Therefore, tax considerations are an integral part of business processes. All transactions should have a business purpose, not only tax a purpose.
5. Accountability to Shareholders
Ajinomoto Group should comply with the tax laws in the territories in which it operates and there is a possibility that a high penalty is imposed when we make a misjudgment.
While currently the number of lawsuits by shareholders in which it is argued that the management took wrong decisions increases, Ajinomoto Group should be able to prevent such lawsuits through this policy before they happen.
Also, Ajinomoto Group should prepare action plans to avoid the expansion of the damage and the loss of our creditability when we make a misjudgment on the initial action.
6. Transfer Pricing
Regarding cross-border intra-group transactions, Ajinomoto Group aims to allocate the profit properly among countries and its subsidiaries based on their value contribution defined by the analysis of the function, assets and risk assumed by each one, considering Armʼs Length Principle.
7. Minimization of Double Taxation
In order to minimize the taxation over the same economic profit in more than one country, Ajinomoto Group often relies on the application of International Tax Treaties signed by the countries where its entities do business.In principle, Ajinomoto Group does not have Permanent Establishments (PE) outside the country.
1. Compliance with Tax Law
Ajinomoto Group is obligated to file and pay taxes within requests and the due dates established according to each countryʼs regulation.
Ajinomoto Group is transparent about its approach to tax. It will regularly report about its tax policy in an understandable and transparent way and it is fully committed to be transparent to local tax administration.
3. Relationships with Government and Tax Authorities
Ajinomoto Group follows the Government Rules regarding its tax structure, collection mechanism and it is engaged also to develop strong, mutually respectful relationships with the tax authorities based on transparency and trust.
4. Tax Structure
Ajinomoto Group does not use contrived or unusual tax structures that are intended for tax evasion, have no commercial substance and are not in accordance with the essence of local or international law. Secrecy jurisdictions or so-called “tax havens” are not used for tax avoidance.
5. Business Substance
All transactions must have a business purpose and business substance. Ajinomoto Group does not enter into transactions purely for tax benefits where there is no business purpose and business substance.