Principles underlying the activities of the Group Tax department
In line with our tax policy guidelines, compliance with all applicable tax laws and regulations is the top priority for Group Tax. In this, we consider not only the letter of the law, but also its spirit, reason, and purpose, as well as its wider context.
The Group Tax approach is therefore as follows:
- Determination of the relevant facts, the business, economic, financial, legal and other motivations and aspects
- Development of viable, practical, and robust solutions in cooperation with the other parties involved
- Formulation of sound tax analysis
- Documentation of the facts and the tax positions taken including the respective analysis
- Use of efficient processes to correctly comply with tax declaration obligations
- Engagement in a close, trust-based working relationship with the tax authorities
A great deal of emphasis is placed on the professional and personal qualifications of employees. Many Group Tax employees are qualified as tax advisors and/or lawyers, as well as having additional relevant qualifications such as studies abroad or other academic titles; the majority of them have a degree in business studies or law. The regular training of employees is ensured by means of internal and external, regular and ad hoc seminars, meetings, conferences, and through other forms of knowledge sharing. Employees are involved in a wide range of relevant working groups and committees of industry associations to ensure that the latest topics and developments are addressed. Appropriate specialization and coverage of special issues ensure the necessary specialist knowledge.
In the context of digitalization, special IT tools are increasingly being created for and by Group Tax to support the efficient documentation of tax-relevant facts and compliance with tax obligations as well as to create the best possible working environment for the tax authorities for tax audits.
Accurately analyzing the tax situation and providing support to ensure the tax efficiency of issues and projects requires a precise and profound knowledge of the business, economic, and financial issues as well as their legal and other aspects and relevant general conditions. We therefore also focus on ensuring a general closeness to the business units and to other relevant departments in the Group. To this end, special opportunities have been created in the Group Tax department in particular for short secondments and other opportunities for exchange, in addition to the other usual sources of information.
Group Tax is involved in the decision-making process for all of the Group’s significant measures. In this context, the relevant facts are comprehensively determined and considered for the tax analysis. In the event of multiple suitable alternatives to achieve the same purpose, Group Tax will recommend the most tax-efficient option. Of course, tax aspects are not usually the deciding factor, rather the process weighs up all relevant aspects. To prepare for decisions, Group Tax works efficiently with all other departments involved.
Tax analyses are required, for example, for:
- the development of new and amendment of existing business, production, and sales models, the development of new markets
- the acquisition and disposal of shares, business operations, entities, and groups of companies
- corporate restructurings and other restructuring measures, as well as changes in the relevant internal processes
- other relevant projects and transactions
Our responsible approach to tax
It is the aim of Group Tax to facilitate the business and value creation in the Group as much as possible, not to hinder it, and to make a constructive contribution to the formulation of solutions and approaches that are as robust and practicable as possible from a tax perspective through a deep knowledge of the Group’s business activities and processes. Group Tax is committed to creating value for the shareholders of Deutsche Telekom by means of sustainable tax efficiency and by contributing to the joint success of the Group. As such, the decisions and approaches taken by Group Tax also take into account the consequences for business activities and the Group’s internal processes as well as any other implications, for example, for the reputation, profile, or policies of the Group.
Group Tax endeavors to keep disputes with the tax authorities to an absolute minimum.
We seek to rule out or minimize in advance tax risks wherever possible and reasonable on a case-by-case basis by obtaining binding statements from the competent tax authorities.
Approach to tax structures and transfer prices
For transfer pricing matters, the Deutsche Telekom Group has a Transfer Pricing Guideline, which applies the arm’s length principle. We ensure through appropriate processes that the arm’s length principle is taken into account when agreeing the terms and conditions of intragroup relationships.
The Deutsche Telekom Group is implementing the new reporting obligations arising in connection with the BEPS developments, including country-by-country reporting. A project team was set up early on and a specific IT tool developed for this purpose. The respective information and documents are sent to the competent tax authorities on time. There will be no further publication at present beyond the already extensive information included in Deutsche Telekom’s annual report, since the data ultimately would not provide transparency with regard to the distribution and appropriateness of the tax burden in our individual countries due to a lack of informative value on account of the idiosyncrasies of local tax laws and the special features of our foreign activities, e.g., due to the existence of tax loss carryforwards from our past business activities.
In accordance with our profile as an international telecommunications group, we have business activities in a large number of countries. Generally, we conduct local business activities through subsidiaries in the respective country. For example, in the Netherlands, a key location for the Deutsche Telekom Group, we conduct substantial business activities through a number of subsidiaries. Among other things, T-Systems has a presence there, as in many other countries, through a Dutch subsidiary, which is responsible for local activities. We are also extensively involved in mobile communications there, through the subsidiary T-Mobile Netherlands, which has just additionally taken over the activities of the Dutch Tele2 group. Due to the Netherlands being a market-standard jurisdiction for this, we already established a Group financing company as well as our international holding company there years ago. As an international group, Deutsche Telekom aims to set our activities on an international footing and not to concentrate them entirely in Germany, so as to further good international cooperation and partnerships within the Group. From a tax perspective, inappropriate profit transfers are prevented from the outset by clearly applying the arm’s length principle. Furthermore, the shift of the taxable basis is in any case impossible due to the application of the relevant tax provisions of the German controlled foreign corporation rules.
We do not have any artificial special purpose entities without economic substance in low-tax countries.
We do not operate any aggressive tax structures exclusively for the purpose of tax avoidance. Group Tax engages in robust tax planning on the basis of a comprehensive analysis of the tax laws and regulations.
In accordance with the obligation to generate value for the Deutsche Telekom Group and its shareholders, Group Tax is also subject to efficient cost control.
Group Tax is award-winning
Group Tax won the renowned Juve Award for Best Inhouse Tax Team 2016 for its special efforts with regard to its good working relationship with the tax authorities and its efficient digitalization of tax processes, as well as its participation in a special project for a prompt tax audit.
Social commitment: Pro-bono consulting
Deutsche Telekom welcomes and promotes the social engagement of its employees. As such, it expressly supports Group Tax staff who want to contribute their expertise in the form of pro-bono consultations for charitable purposes. The Corporate Responsibility unit provides them with help, where necessary, in finding suitable opportunities for such work. A framework policy from 2012 governs the exact approach for this kind of pro-bono work – e.g., the drafting of articles of association that satisfy public benefit criteria for tax purposes – by individual Group Tax employees.