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Nitto Group Tax Compliance Policy

  1. Pay taxes without excess or deficiency, complying with the laws and maximize the shareholder value through the optimization of cash flow.
  2. Follow the operation rules and execute appropriate accounting processes.(*)
    (*) Attribution of profit/loss, Losses from asset disposal, pricing of trading, loan etc.
  3. Determine the price and the cost burden in full consideration of Transfer Pricing taxation for intra-group transactions across borders.

We believe that in order to realize our tax compliance policy, we must strengthen each Nitto group employee’s law-abiding spirit and understanding of tax processes. To that end, we have taken the following steps:

  • We provide many opportunities for employees to enhance their understanding of tax processes. For example, we conduct tax-specific training for newly promoted managers each year.
  • We periodically assess for signs of taxation risks, focusing mainly on transfer pricing taxation. If we determine the presence of these risks, the responsible business sector analyzes causes and plans countermeasures.
  • Questions regarding taxes throughout Nitto group are handled by Tax Management Department and Accounting Department and we refer to tax authorities when necessary.

Basic Principles of the Nitto Group Tax Compliance Policy

The following discusses the basic principles that support our Tax Compliance Policy, which outlines key points related to tax matters that at a minimum all Nitto Denko Group employees should understand and adhere to. The assumptions below underlie the discussion of the basic principles contained thereafter.

① In general, all taxes are covered including but not limited to corporate income tax, indirect tax (e.g. VAT, customs duties), transfer pricing and payroll tax.

② The items discussed below not only apply to initiatives led by the Tax Management Department at Headquarters (“HQ Tax Department”) but also other cases where Group Divisions and Regional Headquarters (“Regional HQ”) undertake similar roles and responsibilities to those undertaken by the HQ Tax Department.

1. Tax compliance

We are committed to complying with applicable tax laws and regulations in every country we operate, appropriately utilizing tax incentives in the countries where they are available and ensuring our tax affairs are managed with the interest of all stakeholders. Based on the Nitto Group Business Conduct Guidelines, we will act with the highest ethical standards and transparency and comply with all tax filing and payment obligations in each country we operate. In addition, we will abide by the following basic rules to ensure we are duly fulfilling our tax responsibilities.

① Perform financial accounting operations appropriately based on applicable corporate rules and processes:

  1. Prepare operations manuals for support staff performing routine activities
  2. Establish a system of checks and balances by separating the preparation and review processes
  3. Consistently maintain factual evidence supporting our accounting treatments

② In addition to periodically evaluating potential tax risks associated with cross-border transactions such as transfer pricing, the HQ Tax Department works with relevant Group Divisions and Group Companies to examine the related tax implications before important business decisions are made.

2. Tax governance

① Tax matters that require global oversight such as tax audits and cross-border transactions (e.g. transfer pricing, withholding taxes) are managed at the group level by the HQ Tax Department. Other tax matters (e.g. VAT) that can be handled locally are managed by the Group Companies with moderate involvement by the HQ Tax Department.

② Based on information gathered from Group Companies, the HQ Tax Department periodically monitors the tax positions of each company and tax issue and determines appropriate measures as necessary.

③ The HQ Tax Department reports relevant tax issues to the CFO and other executives responsible for the Finance and Accounting operations and also reports critical tax issues to the CEO and COO (this also applies to each section below).

3. Tax planning

Motivation for tax planning
Because of the interaction between all of our business operations and tax, Group Divisions and the HQ Tax Department will work together to evaluate available planning options. An opportunity that minimizes tax costs will be selected to the extent there are multiple options which are consistent with the group’s business objectives.

Approach by each group
Depending on the magnitude of a tax issue, tax planning may be performed by Group Companies as it needs to maintain pace with the rapidly changing business. These issues are first shared with the HQ Tax Department and the Group Companies work with the HQ Tax Department in the event they are considered to be pertinent issues.

Engaging external tax advisors
The use of external advisors is imperative as they can provide accurate interpretations of tax laws and share a wealth of information on the current tax environment, as well as relevant case studies. The HQ Tax Department is responsible for appointing external advisors with a proven track record to deal with tax issues requiring global oversight, while Group Companies are responsible for engaging external advisors for other tax issues as appropriate.

4. Tax risk management

We do not actively take risky tax positions that cannot be justified based on the tax laws of each country but there is a possibility that tax authorities may not accept a certain tax position even if we determined it can be reasonably supported. Therefore, we will consult with external advisors and take advantage of advanced ruling systems made available by relevant tax authorities as necessary and prepare documentation presenting a transparent discussion of the issues to minimize relevant risks.

5. Relationships with tax authorities

Based on our transparent tax governance structure, the Nitto Group places the highest priority in ensuring the management of our tax affairs are consistent with all stakeholder expectations and therefore seeks to maintain a mutually open and cooperative relationship with the tax authorities of each country. We will ensure preventive measures are taken to avoid the reoccurrence of past tax issues addressed by tax authorities, while cooperating through the use of advanced ruling systems and other approaches in the event there is uncertainty on the tax treatment, interpretation of tax laws and other relevant issues with respect to future transactions.

Publication date: 19/3/2018
Applicable Law for the Tax Strategy Disclosure Requirement by Each Country
Country Applicable Law Content of the Law
United Kingdom Finance Act 2016 Schedule 19(2) The head of the sub-group must ensure that a sub-group tax strategy for the sub-group, giving the information required by paragraph 20, is prepared and published in accordance with this paragraph.
  

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