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The Xellia Tax Policy

Corporate Values and Policies of Xellia

Taxes are considered part of the social responsibility of Xellia, and the Tax Policy is therefore part of the overall Sustainability Policy for Xellia.


Tax Policy for Xellia

The purpose of the Tax Policy is to describe how taxes are viewed and managed by Xellia, and how tax risk is considered from an overall perspective.


Scope of the Xellia Tax Policy

The Tax Policy governs all taxes paid by Xellia (including corporate income tax, withholding taxes and consumption taxes such as VAT, state taxes, property taxes, customs and taxes related to compensation of employees and encompasses all tax matters that arise within Xellia). This includes tax risks and opportunities which arise within Xellia.


Responsibilities and role of management

As part of Xellia’s approach to responsible tax, Xellia’s Board of Directors has adopted this Tax Policy. Xellia’s Board of Directors is ultimately accountable for the compliance with it. The Chief Financial Officer is responsible for ensuring that the applicable Tax Policy is adhered to. The responsibility to implement appropriate tax governance measures is delegated to the Director Corporate Finance, who is overseen by the Corporate Management team. The Director Corporate Finance maintains an internal tax process and will ensure ongoing reporting to the Board of Directors on the progress and status of the responsible tax work.


Main objectives of the Xellia Tax Policy

The purpose of the Tax Policy is to maintain a responsible and robust tax approach with the following main objectives:

  1. Mitigating tax risks by taking tax decisions on a transparent and informed basis.
  2. Ensuring best effort to be in compliance with fiscal laws and regulations.
  3. Striving to avoid any controversy with tax authorities in the jurisdictions where business is carried out and where investments are made, and where controversy is inevitable to ensure collaborative interaction with tax authorities.
  4. Only engaging in investment structures that are driven by commercial considerations and supported by economic substance which is not artificial.
  5. Being transparent about the approach to tax.

Xellia can justify a tax position when it is in line with the business operations, and when a technical assessment supports that this tax position is in line with the letter of the law, the intention of the law, or case law. Xellia will take reasonable steps to determine and follow the intention of the legislation. Being ‘responsible’ implies doing business in a way that meets the expectations of a good corporate citizen. This means having a balanced tax risk profile and not engaging in aggressive tax planning, and moreover paying taxes where profits are earned in accordance with international transfer pricing rules. The five key tax objectives are presented in greater detail below.


Management of Tax Risk

Tax risk is defined as any exposure with respect to taxes (direct or indirect, cash or deferred including penalties and interest) that may result in costs which are unforeseen in financial forecasts and planning. A tax risk exposure may arise as a consequence of:

  • Non-compliance with existing tax legislation
  • New legislation or case law in any of the countries where business is carried out and where investments are made
  • Tax positions challenged by tax authorities in any of the countries where business is carried out and investments are made
  • Developments in business operations which may need special attention from a tax perspective
  • Corporate group structure and flow of funds, services and goods which may trigger a tax (e.g., a withholding tax) that could have been avoided or which were not foreseen
  • Costs or losses which may not be utilized (deducted) for tax purposes
  • Undesired accounting effects on tax positions in any of the countries where business is carried out.

Xellia has a low tolerance for tax risks. When implementing business transactions, Xellia aims to understand the tax implications and risks. When reviewing the risks of a tax decision or action, management always bears in mind the requirements of the Xellia Tax Policy, the legal and fiduciary duties of directors and employees, the maintenance of corporate reputation, the wider consequences of potential disagreement with tax authorities, and any possible impact in Xellia’s relationship with them. Where tax laws allow for different interpretations or choices, Xellia will take the view or the choice that is most beneficial to the business, provided that this position is aligned with the corporate values and can be legally as well as morally justified and defended in accordance with this policy. Xellia will only adopt a tax position if it can be explained and defended.


Ensure best effort being compliant

Xellia make its best effort to comply with all tax regulations and disclosure requirements in all countries and states in which business it’s carried out and/or investments are made. The Xellia ambition is to apply best practices at all times regarding tax computation. Xellia makes use of local advisers as appropriate, as well as ensures that local finance and business managers are supported in their roles with respect to tax matters. Xellia prepares and submits tax filings required in a timely manner.

If Xellia discovers errors in tax returns or correspondence with tax authorities, Xellia will disclose and correct as soon as reasonably practicable after they are identified. In areas where the applicable tax legislation is uncertain, Xellia ensures to prepare an analysis to make an informed decision which is legally robust (i.e., justifiable, and defendable). In this regard, advice from external advisors is obtained.

Complying with the fiscal laws and regulations implies that Xellia takes reasonable steps to determine the intention of the legislature and to interpret those fiscal rules consistent with that intention considering the statutory language and relevant, contemporaneous legislative history.

All intercompany transactions and dealings within the Xellia Group takes place at arm’s length terms, as defined by the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2022) and the Report on the Attribution of Profits to Permanent Establishment (2010), unless otherwise required by local law. Xellia pays taxes where profits are earned in accordance with international transfer pricing rules.


Avoid controversy and collaborative interaction with tax authorities

As a general rule, Xellia strives to avoid any controversy with tax authorities in the jurisdictions where business is carried out and where investments are made. Consequently, Xellia adopts a robust (i.e., justifiable and defendable) tax position where the tax regulations governing business transactions allow for different interpretations or choices.

Xellia aims for all dealings with the tax authorities to be conducted in a collaborative, courteous and timely manner. Xellia participates in tax audits in a collaborative, open and fair manner based on mutual respect, transparency and trust. Xellia shares with tax authorities what they have a legitimate right to see. Negotiations and settlements are made and based on principles in accordance with applicable legislation. However, Xellia does not accept aggressive and wholly or partly unjustified positions taken by tax authorities. If tax authorities take a position which Xellia finds technically and legally wrong or aggressive, Xellia will defend the chosen tax position in the judicial system.


Attitude towards tax planning

As part of a responsible tax behavior, Xellia believes that non-aggressive tax planning is acceptable. Non-aggressive tax planning measures include implementing structures with the purpose of reducing or eliminating (withholding) tax exposures and planning on the price range available according to traditional transfer pricing approaches. Acceptable tax planning is exemplified by the following (the list is not exhaustive):

(a) General use of holding companies

(b) General use of available double taxation treaties where the business substance justifies the use of a specific double taxation treaty

(c) General use of current and historic tax losses to reduce taxable income

(d) General use of debt financing

(e) Use of hybrid entities for non-aggressive tax planning

(f) Structuring of transfer pricing setup in accordance with acceptable practices in jurisdictions where business is carried out and investments are made

Tax planning measures in Xellia support the overall business and will only be undertaken in this context.

Xellia does not engage in aggressive tax planning. Aggressive tax planning is defined as exploitation of technicalities in a tax regime or as exploitation of inconsistencies between tax regimes to reduce tax liability. In addition, Xellia considers aggressive tax planning to include transactions carried out solely or for the main purpose of obtaining a tax advantage, and where substance and form is misaligned. Xellia will not engage in aggressive tax planning or structuring, as exemplified below:

(a) Abuse of tax treaties where holding companies are used for the sole purpose of reducing or avoiding withholding tax, and thus would likely not be in accordance with the OECD Principal Purpose Test (PPT)

(b) Transfer pricing planning for tax avoidance purposes

(c) Use of financial instruments for aggressive tax planning

(d) Use of hybrid entities for purposes of aggressive tax planning

(e) Use of highly leveraged acquisition structures in jurisdictions without general interest limitation rules in line with OECD/US principles, with the aim of reducing taxable income not in line with international market standards


Provide transparency on tax matters

Xellia is committed to being open and transparent with respect to tax. As part of our responsible tax behavior, this Tax Policy is made publicly accessible and Xellia will work closely with its majority shareholder Novo Holdings A/S in providing relevant tax information which is made publicly available by Novo Holdings A/S - both mandatory and voluntary disclosed information.