Economic Contribution and Taxes
Our purpose is to create sustainable value with everything we do, which also means balancing the interests of all our stakeholders.
- With production sites in 57 countries, Henkel’s global business operations play a major role in contributing to regional development.
- A substantial amount of our sales directly benefit our suppliers and other business partners in 123 countries.
- The largest share of the value added that we create goes to our employees in the form of salary and pension benefits. Some of the value added is paid out to shareholders as dividends. Our business activities generate tax income for the public sector; lenders receive interest payments.
- The value added remaining in the company is available for investments in future growth.
- Being a good corporate citizen means that we comply with all applicable laws, rules and regulations in the communities in which we operate. This includes respect for all relevant tax laws, and ensuring the correct calculation and payment of local taxes at the right time, as required by those laws.
- Create sustainable value
- Responsibilities and expectations
- Our approach to tax
Henkel aims to be a good corporate citizen wherever it operates and is committed to create sustainable value when conducting business. This is based on a clear vision and a set of shared values that provide the foundation of the behavior and actions throughout the company. With production sites in 57 countries, Henkel’s global business operations play a major role in contributing to regional development. We create employment and business opportunities in the local economies as an employer of around 52,950 people, as well as through our activities as a buyer, supplier, business partner and investor.
A substantial amount of our sales directly benefit our suppliers and other business partners in 123 countries. The largest share of the value added we created in 2020 – nearly 5.4 billion Euro – went to our employees in the form of salary and pension benefits (61.5 percent). Central and local government received 10.0 percent in the form of taxes; lenders received 2.0 percent as interest payments. We paid 15.0 percent of the value added as dividends to shareholders. The remaining 11.2 percent of value added is available for investments in future growth.
Being a good corporate citizen means that we comply with all applicable laws, rules and regulations in the communities in which we operate. This includes respect for all relevant tax laws, ensuring the fulfillment of local tax obligations and paying the right amount of local and national taxes at the right time, as required by those laws.
Direct and indirect taxes are a major source of income for all levels of state – and a national matter that remains in the hands of the individual countries. As a consequence, various national tax laws exist alongside each other, leaving multinational companies with the risk of double taxation. On the other hand, international tax differentials also provide globalized firms with the opportunity to reduce their overall group tax burdens and optimize their tax positions. For this reason, global players see themselves increasingly challenged by governments and the general public. As a consequence, companies need to be able to explain the way they allocate their profits and losses around the globe and the corporate structures they adopt in all countries where they are active.
Against this background, Henkel is carefully steering its value-creating activities. We assume our responsibility as a compliant taxpayer, while developing our business in an economically successful manner and ensuring competitive business growth. Our purpose is to create sustainable value with everything we do, which also means balancing the interests of all our stakeholders – this includes promoting economic and social progress in local communities as well as serving the needs of our employees, investors, suppliers, customers and consumers.
We act in full compliance with local tax and customs regulations at all times and are guided by relevant international standards (such as the OECD Base Erosion and Profit Shifting (BEPS) Reports and BEPS Action Plans). It is our aim to comply with the spirit as well as the letter of the law. Furthermore we seek to align our tax contribution with the value we create in the countries we operate in.
Henkel’s transfer pricing system complies with the arm’s length principle. In alignment with domestic tax laws and OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, we have defined a corporate standard to provide our business with guidance on transfer pricing of tangible goods and services in intercompany transactions among affiliated companies in the Henkel Group.
The Finance Tax Group (FTG) has global responsibility for all tax and trade matters within Henkel. FTG performs this duty by setting standards and providing guidance and instruction to ensure compliance with tax and trade requirements worldwide. These standards apply to all direct and indirect subsidiaries of Henkel AG & Co. KGaA (“Legal Entities”). The group’s global network of tax experts also supports Henkel’s businesses worldwide to comply with local tax and trade requirements.
Henkel operates a Tax & Trade Risk Management process to identify and quantify all tax and trade risks. The risks covered include any potential direct or indirect change of tax positions resulting from tax audits, tax assessments, tax law changes or other influencing factors that change the effective global tax rate and liquidity.
Our tax strategy and structures ensure that the sustainable value created for the Henkel group is considered adequate and acceptable as normal business conduct. In line with this, we do not make use of secrecy jurisdictions or tax havens to avoid taxes. Our approach to tax is transparent. We regularly report on strategy, major developments, and value created in our Annual Report. Our tax declarations are filed on time and in good quality. With regard to tax audit management, we participate in audit programs offered by tax authorities and engage tax and trade authorities prior to examinations. These measures enable us to fulfill our responsibility as a compliant taxpayer.
In 2020, Henkel’s effective tax rate was 26 percent. We paid 618 million euros in income taxes which is spread across our regions as follows: 37 percent are paid in Western Europe, 13 percent in Eastern Europe, 17 percent in North America, 6 percent in Latin America, 20 percent in the Asia-Pacific region and 7 percent in the Africa and Middle East region. In addition to its corporate taxes, Henkel also provides a substantial source of income for all levels of state in the form of custom duties, payroll taxes, pension taxes, social security costs, property taxes, energy, VAT, etc.
We are committed to leadership in sustainability – this is one of our core corporate values. Paying taxes is an important part of our wider economic and social impact. This means that managing tax risks and ensuring full compliance with all tax and trade rules is key to managing our business responsibly and in an economically successful manner. Balancing the interests of all our stakeholders – in particular our investors, suppliers and customers as well as the communities we operate in – we are aiming to maintain an effective tax rate of around 25 percent in 2021. In this way, we aim to create sustainable value with our future business activities – together with our employees, partners and stakeholders.