Avoidance of artificial structures, regular monitoring of international tax transparency developments and collaboration with the CSR department. These are some of the measures used by Iberdrola to avoid tax risks and inefficiencies in the implementation of business decisions. CSR Europe released a Blueprint on Responsible and Transparent Tax behaviour recently featuring their business case. Discover the 3-step approach offered by CSR Europe.
Iberdrola, the Spanish public multinational electric utility company, implemented its tax strategy to ensure compliance with applicable tax laws and regulations. With respect to tax planning, the company optimises its tax arrangements by looking closely at its substance and the real economic value of activities in each country. Iberdrola commits to engaging only in those (intercompany) transactions that have a sound business rationale.
The Spanish company monitors all international tax transparency developments and anti-tax-avoidance initiatives on an ongoing basis. Following the OECD/G20’s Base Erosion and Profit Shifting (BEPS) project, Iberdrola pays close attention to the substance of business transactions and avoids artificial structures. Concretely, one of the “good tax practices” in relation to tax planning included in its Corporate Tax Policy reads: “not to use artificial structures unrelated to the Group’s business for the sole purpose of reducing its tax burden, nor enter into transactions with related entities solely to erode the tax basis or to transfer profits to low-tax territories”.
Iberdrola follows two main principles in relation to tax planning:
1. Respect of legislation (i.e. tax planning within the boundaries of law); and
2. No use of artificial structures (i.e. a conservative and prudent approach to tax planning).
Iberdrola publicly discloses its tax planning principles in its Corporate Tax Policy. In the process of defining those principles, the company took into account the opinions and comments of various external stakeholders, including the results of a group of large Spanish business taxpayers taking part of the “Code of Best Tax Practices” initiated by the Spanish tax authorities. Internally, the tax department engages with Iberdrola’s CSR function, among others, to ensure the Corporate Tax Policy’s alignment with the company’s overall vision and values in the short, medium and long term. The CSR function is consulted, asked to provide feedback and suggest improvements also stemming from the interaction with different stakeholder groups.
The company’s tax principles are continuously reviewed, and they are mentioned in Iberdrola’s Sustainability Report together with a clarification of all tax incentives and subsidies it receives. The group monitors changes in legislation to ensure the tax policy is compliant and aligned with that legislation at any time. Iberdrola says it has a robust governance structure in place to oversee the implementation of its tax principles within the group. Depending on the nature and significance of a certain transaction, this must be signed off by either the local and/or global Head of Tax or the Board of Directors. In addition, the company is also planning to improve internal communications on its tax planning principles in order to raise its employees’ awareness. Learning sessions and training for employees are part of the future direction they would like to take.