Policies and general principles in matters of taxation

Good governance, transparency and integrity

Our commitments to good governance, transparency and integrity, along with creating value for shareholders and investors, govern our business management and corporate activities.

Values

At Colonial we are aware of the importance of our contribution to public finances and sustaining them in accordance with our economic capacity by punctually complying with our tax obligations based on the principles of fiscal responsibility and transparency.

At Colonial we are committed to acting with transparency, honesty and respect for the law and the good of the community when managing our tax affairs. Our commitment is to comply with the law by making a reasonable interpretation of them, cooperating with the authorities and providing them with the necessary information. In this context, compliance with prevailing tax legislation at all times is part of the principles that inspire Colonial's corporate responsibility, with the taxes paid being one of its contributions to the economic and social development of the society in which it operates.

Tax Strategy

Colonial's tax strategy is governed by the following guidelines:

  • Reducing tax risk and preventing those conducts that are likely to generate them by promoting ethical and upright behaviour that complies with prevailing tax requirements. 
  • Avoiding the use of opaque structures for tax purposes, understood as those intended to prevent the relevant Tax Administrations of the final party responsible for the activities or the ultimate owner of the assets or rights involved becoming aware.
  • Using the specific instruments laid down by the regulations and the Code of Best Tax Practices (prior consultations with the tax authorities, prior assessment agreements, etc.) to reduce conflicts and litigation derived from the applicable regulations being interpreted differently.
  • Collaborating with the relevant Tax Administrations in detecting and searching for solutions regarding fraudulent tax practices that may unfold in the markets in which Colonial operates.
  • Providing the tax-related information and documentation requested by the relevant Tax Administrations, in the shortest possible time and with the necessary scope.
  • Promoting cooperative relations with the Tax Administration.

Colonial's Tax Strategy was approved by Colonial's Board of Directors on 10 December 2015 and is updated when required.  

Tax Risk Management and Control System

The Audit and Control Committee (hereinafter, ACC), in accordance with the Regulations of the Board of Directors, is entrusted with the function of overseeing the operation and effectiveness of Colonial's risk management and control system, including any tax-related risks. In this regard, the ACC monitors the fiscal strategy approved by the Board of Directors through the annual fiscal report. In particular, the ACC issues a prior report to the Board of Directors on (i) the creation or acquisition of interests in special purpose entities or entities with registered offices in countries or territories that are considered tax havens, (ii) the operations with related parties, and (iii) the main operations with economic and tax significance, especially on corporate reorganisation operations.

In accordance with the foregoing, the ACC is responsible for directly overseeing the Internal Audit unit, as the unit responsible for ensuring the company's risk control and management systems work properly. It ensures the Management participates in strategic decisions on risk management and control and fosters a culture in which risk is a factor to be considered in all decisions and at all levels within the company.

The tax risk management and control model is made up of five elements that, combined, pursue an adequate control system for risk prevention:

  • Control Environment: set of standards, processes and structures that constitute the basis on which the organisation's internal control is developed.
  • Risk assessment and control activities: this is carried out jointly by the Internal Audit unit and the process managers and risk owners. Each tax risk identified has at least one control activity intended to prevent a risk from occurring and mitigate its impact.
  • Oversight activities: this is continuously monitored to check whether its design and operation are adequate with respect to the requirements of the applicable regulations by analysing and resolving the identified incidents.
  • Information and Communication: the required initiatives are promoted to be appropriately disseminated and train staff, so that the members of the company can comply with the regulations.
  • Disciplinary system: non-compliance with the measures contemplated in the model and with the company's rules of conduct are sanctioned by applying the Colonial sanctioning regime contemplated in the company's Collective Agreement.

Colonial's Tax Risk Management Policy, which is intended to be the base document of Colonial's tax control framework, was approved by Colonial's Board of Directors on 10 December 2015 and is updated when required.

The aforementioned Policy seeks to regulate the principles that should guide Colonial's tax function in order to carry out proper management and control of tax risks by building:

  • The principles that should guide the management of tax risks by establishing the obligations and responsibilities within the organisation in this regard and including a description of the measures that must exist to mitigate the possible tax risks identified.
  • The principles that should guide the correct control of tax risks, which firstly include performing a set of ex ante preventive controls and, secondly, performing a set of ex-post controls that entail identifying, measuring, analysing, monitoring and reporting them.

For Colonial, due diligence is an important factor when doing business, both in relation to controlling the selection of the organisation's members (internal due diligence) and the third parties with whom it relates (external due diligence).

In relation to the group's investee companies, Colonial will strive to apply Colonial's Tax Strategy and Tax Risk Management and Control Policy, except in those cases in which, considering their specific characteristics, said companies have their own tax strategy or their own tax risk management and control policy.