Sumitomo Metal Mining Group’s Basic Policy on Taxes
Established: April 1, 2021
Sumitomo Metal Mining (SMM) will, in the conduct of tax affairs associated with business activities, define the basic policy on taxes herein, pursuant to the SMM Group Corporate Philosophy that dictates “SMM, in accordance with the Sumitomo Business Spirit, shall, through the performance of sound corporate activities and the promotion of sustainable co-existence with the global environment, seek to make positive contributions to society and to fulfill its responsibilities to its stakeholders, in order to win ever greater trust.” In addition, SMM and all Group companies will make known to and instill in employees the activities that place importance on compliance focus, maximization of corporate value, and appropriateness and fairness.
1. Tax-related internal controls
At SMM and all Group companies, all persons (corporate officers including
executive officers, and employees including fixed-term and temporary
employees) engaged in considering or implementing tax-related business
processes or individual transactions will share this Basic Policy and ensure
SMM and all Group companies will also seek to resolve tax issues for the entire Group and at each company, by maintaining a system that manages tax risk in each country and region and by business process and that shares information globally.
2. Compliance with tax laws, etc.
Business activities will be conducted in compliance with the tax laws, tax conventions, and other relevant laws and regulations applicable in each country and region, as well as tax-related standards and guidelines published by international institutions and others such as the Organisation for Economic Co-operation and Development (OECD).
3. Treatment as part of business activities
SMM and all Group companies will practice the tax studies and implementation
related to any business process and transaction as part of business activities,
since tax-related risk and tax expenses are closely linked to business
processes and individual transactions arising from such business activities.
SMM and all Group companies will work to minimize global tax risk, such as double taxation related to business activities, through advance pricing arrangements with the tax authorities, consultation with outside experts, and other means. At the same time, SMM and all Group companies will seek to maximize corporate value and achieve its long-term vision, through proactive and constant efforts to utilize tax incentives and optimize tax expenses, tax payment periods, and other factors so that it can maximize after-tax profit and free cash flow.
However, the following types of transactions will not be practiced:
- Transactions aimed solely at avoiding tax, such as transactions using tax havens; and
- Transactions that avoid tax through the transfer of income in forms that clearly depart from the Group’s business objectives and economic realities.
4. Response to transfer pricing
International transactions between SMM and all Group companies will be performed using arm’s length pricing that is calculated based on methods reflecting the transaction details, industry practices, or functional and risk analysis. In conducting a functional and risk analysis of each transaction, there will be compliance with tax-related standards and guidelines published by international institutions and others such as the OECD.
The arm’s length pricing methods primarily applied:
- Method based on market price according to an appropriate benchmark in line with industry practice; and
- Method based on appropriate allocation of profits corresponding to the level of contribution founded on a functional and risk analysis.
5. Fair and appropriate tax
SMM and all Group companies will appropriately fulfill its tax payment obligations in compliance with applicable tax laws and other legal requirements at business activities in each country and region. In addition, SMM and all Group companies will seek to increase tax transparency and to build a constructive and fair relationship with the national or regional tax authorities.
6. Tax-related responsibilities and structure
SMM and all Group companies’ tax activities will manage tax risks on a
global basis and implement appropriate and fair tax treatments, subject to
oversight by the executive officer in charge of SMM’s Finance & Accounting
Department, through the employees in charge of tax matters in the
Finance & Accounting Department and the Group companies of relevant
divisions operating in their respective countries and regions.
Moreover, employees with tax expertise will be assigned as necessary; and education and opportunities to increase tax knowledge will be provided to employees involved in tax considerations and implementation for business processes and individual transactions.