CONSCIOUS APPROACH TO TAX
At Rituals Cosmetics we take a conscious and responsible approach to the worldwide management of taxes to contribute to a more stable, secure, and sustainable society and to be part of the change we would like to see in this world.
Under the current international tax system and OECD transfer pricing principles, profits are taxed where the value for generating those profits is created. For Rituals Cosmetics, the activities that generate most value take place in the Netherlands. For that reason, also most of our taxes are paid in the Netherlands.
Last year (2019), we had an Effective Tax Rate (ETR) of 27.8%. This is our worldwide tax charge in the 2019 Rituals Cosmetics Enterprise Annual Report. The ETR of 27.8% is higher than the standard corporate income tax rate of 25% in the Netherlands, which is one of the highest rates we face within our group. Many countries in the EU, in Asia and the US apply lower corporate income tax rates.
Within Rituals Cosmetics, we have a Code of Conduct in place that sets out the behaviour we expect from all our employees. Tax Evasive behavior is not accepted. Rituals Cosmetics takes full responsibility for paying the right amount of taxes, at the right time, in the country where value is created, without overpaying.
OUR STRATEGY BUILDING BLOCKS
Our Tax Strategy consists of 5 interconnected building blocks. Hereafter, we will elaborate on these building blocks, including the related Tax principles we adhere to.
Our headquarter is based in the Netherlands and we are organized centrally. The benefit of this is that we can offer new innovative products often and quickly and that our business set-up is simple and efficient. This enables us to create more value for all our customers and other stakeholders.
Our business set-up is fully driven by commercial considerations and aligned with the business activity we have. We only have entities outside the Netherlands where we have opened own stores, plan to do so shortly or are active through one of our other lines of business. In line with this, we do not make use of artificial company set-ups to secure tax advantages.
At Rituals Cosmetics, we ensure to comply with all Tax legislation and Tax compliance obligations in time and pay the right amount of tax in all countries where we create value. Understanding how and where the different companies in our Group create value is therefore key and Rituals’ Tax Department is tracking this in close collaboration with all stakeholders involved.
We adhere to relevant international standards and projects, such as the OECD transfer pricing guidelines and the Base Erosion and Profit Shifting project (BEPS).
We have a Transfer Pricing Strategy in place for the intercompany transactions arising from our centralized model. This strategy ensures that the charges between our companies and the remuneration of our companies are at so-called arm’s length, benchmarked and well documented in our Transfer Pricing Documentation. Our biggest challenge here is to ensure that tax is only paid once and that no additional unnecessary costs are incurred.
In the Netherlands, where our headquarter is based, we have a constructive relationship with the Dutch tax authorities. We are pro-actively in contact with them on a regular basis. This includes discussing the tax impact of new initiatives and changes within our business.
Outside the Netherlands, we also work towards constructive relationships with local tax authorities based on transparency, mutual understanding, and trust.
The Tax Department is part of the Finance Department, which are both centrally organized in Amsterdam, and which reports to the Chief Financial Officer (CFO) of the Rituals Cosmetics Group.
The Tax Department is, amongst others, responsible for Tax strategy work, identifying Tax risks, implement monitoring controls, creating and rolling out relevant policies, ensuring Tax awareness within the company and stay informed on Tax developments. They work in close collaboration with the Finance colleagues, who are responsible for executing Tax compliance activities, and with the business.
We have a Tax Control Framework in place. Part of this, the Tax team created an online Global Tax Compliance tool giving insight in all local Tax compliance obligations. Through this tool, our Finance Director and CFO can get up to date insights in our Global Tax Compliance status within just one click.
The Tax team and the Finance director report to the Managing Board on compliance. They also update the Supervisory Board’s Financial Committee on key tax challenges faced quarterly.
External tax advice is obtained on material transactions and whenever the necessary expertise is not available in-house.
We are transparent about our approach to the management of Tax and the right amount of taxes we pay. We do this through this publicly available document and the Tax note in our annual accounts.
This document reflects how the Tax function is managed on a day-to-day basis and is approved by the Managing Board on 10 December 2020.
The responsibility for adherence to this sits with the Rituals Tax team, the Finance director, and our CFO. A copy of this approach, which is treated as a policy, is available to all Rituals employees.