Stora Enso's operations generate value through taxes for governments around the world. In 2016, Stora Enso paid more than EUR 1 billion to public sectors including EUR 789 million in collected taxes.
Stora Enso is committed to ensure that the group observes all applicable tax laws, rules and regulations in all jurisdictions where it conducts business activities. Stora Enso follows international transfer pricing guidelines and local legislation. In addition to our legal and regulatory requirements, our tax principles comply with our values, highlighting the importance of 'doing what's right'. Furthermore we seek to ensure that our tax strategy is aligned with our business and commercial strategy. We only undertake tax planning that is duly aligned to economic activity. This means that all tax decisions are made in response to commercial activity, and tax is only one of many factors that are taken into account when making business decisions.
We respond to tax incentives and exemptions granted by governments on reasonable grounds and have operations in countries that offer favourable tax treatments, where their location is also justified by sound commercial consideration.
Stora Enso has operations in the following locations that offer favourable tax treatments:
- Our joint operation Montes del Plata operates a pulp mill in a Special Economic Zone in Uruguay.
- Stora Enso's two forestry companies in Guangxi, China are entitled to exemption from corporate income tax and value added tax on their sales, and our industrial company will benefit from reduced tax rates during the first 10 years of operation.
- Stora Enso owns a dormant company in Luxembourg with equity of EUR 3 million, which is a remnant of a former legal structure.
- We conduct business, mainly sales services, in the United Arab Emirates, Singapore and Hong Kong.
- For logistical and operational reasons, pulp from our joint operations in Brazil and Uruguay is traded via a pulp sourcing and marketing company based in the Netherlands.
1. Spotlight on taxes in Finland
Stora Enso did not pay corporate income tax (CIT) in Finland in 2016 because of tax losses carried forward from previous years. The tax losses of EUR 801 million carried forward in Finland are the result of a number of factors including high closure and restructuring costs incurred over the past few years. However, as an employer we paid EUR 97 million employment taxes and our business triggered operational tax payments of EUR 15 million. For further information, please see Note 9 in the Financail Report 2016.
2. Taxes in China
The sales of self-produced plantation products of our two forestry companies in Guangxi, China are entitled to CIT and Value added tax (VAT) exemption. As a consequence, input VAT paid on the purchase of inventories, which relate to those tax exempt sales, is not creditable. Our related industrial entity in Beihai, Guangxi, started operation in 2016. Due to accumulative input VAT balance and high capital expenditure cost in the construction period, it has not incurred any CIT or VAT payable yet in relation to its operation. The Beihai Mill is entitled to a reduced Corporate Income Tax rate of 15% for the first 5 years from the year when it obtains the first operating revenue and 20% for the following 5 years instead of the application of the statutory tax rate of 25%.
3. Taxes in Uruguay
Montes del Plata runs a pulp mill in a Special Economic Zone, which exempts the company from several taxes as e.g. Corporate Income Tax and withholding taxes, Net Wealth Tax, VAT, Customs duties and import taxes. The Uruguayan government has introduced this tax incentive to stimulate the growth in economy and the employment rate. As the government’s intention matches with our business plan, it is fair and in alignment with legislation and our values to take the advantage of the special tax status. However, not all operations in Montes del Plata are covered by the tax exemption and among others, we paid e.g. property taxes and employment taxes in Uruguay.
4. Companies in low tax jurisdictions
Stora Enso owns a dormant company in Luxembourg with equity of EUR 3 million. The company is a remnant of a former legal structure.
Stora Enso owns companies in United Arab Emirates, Singapore and Hong Kong, which are performing operational activities, mainly sales services in their specific regions. The profits of those companies are not or only low taxed in their countries of tax residence. All companies that are not taxed or only taxed on a low level are reported as CFC entities (controlled foreign companies) in Stora Enso Oyj’s tax return if they qualify as CFC companies according to Finnish tax law. In that case their income is taxed as a part of Stora Enso Oyj’s taxable income in Finland. Currently Stora Enso has tax loss carry forwards in Finland and therefore no cash tax is payable on the reported corporate taxable income, including possible CFC income.
5. Pulp from Brazil and Uruguay supplied via a trading company in the Netherlands
As Amsterdam is an attractive location from
logistical point of view, pulp from our joint operations Veracel in Brazil and
Montes del Plata in Uruguay is traded via our pulp sourcing and marketing
company based in the Netherlands. Pulp from Montes del Plata is sold to
external customers. The pulp produced in Veracel is supplied predominantly to
our mills in Europe and China. Our Dutch company invoices Veracel pulp to our
mills at a price which is similar to the price unrelated parties would pay
under comparable conditions. This ensures that our pulp consuming mills pay a
market price for the pulp and we do not artificially influence their
profitability. The supplies from Veracel and Montes del Plata to Stora Enso
Amsterdam are priced in accordance with the Brazilian and Uruguayan tax