Our business activities generate a substantial amount and variety of taxes. We pay corporate income taxes, royalties, production taxes, employment and other taxes. In addition, we collect and remit payroll taxes as well as indirect taxes, such as excise duties and VAT. The taxes we collect and pay represent a significant part of our economic contribution to the countries in which we operate. At OMV Petrom Group, we are committed to complying with tax laws in a responsible manner and to having open and constructive relationships with tax authorities. In 2020, OMV Group published a new Tax Strategy acknowledged by OMV Petrom Group, as part of the OMV Group. This Tax Strategy was valid during 2021.
Our tax compliance supports OMV Petrom Group’s business and reflects our commercial and economic activity. OMV Petrom Group does not engage in aggressive tax planning which consists of artificial structures put in place merely to save taxes or of transactions lacking economic substance aimed at obtaining undue tax advantages. We comply with applicable tax laws and seek to limit the risk of uncertainty or disputes. We perform transactions between OMV Group companies on an arm’s-length basis and in accordance with current applicable OECD principles.
OMV Petrom Group companies are established in suitable jurisdictions, considering our business activities and the prevailing regulatory environment available. OMV Petrom Group does not establish its subsidiaries in countries that do not follow international standards of transparency and exchange of information on tax matters, unless justified by operational requirements in line with OMV Petrom Group’s business ethics principles and our Code of Conduct.
Since 2016, OMV Petrom has provided mandatory disclosures under the Payment to Government Directive (according to Chapter 8 of the Annex 1 of Ministry of Finance Order 2844/2016, transposing Chapter 10 of the Accounting Directive 2013/34/EU of the European Parliament and of the Council) and has published its payments made to governments in connection with exploration and extraction activities, such as taxes, royalties or license fees, rental fees, entry fees and other considerations for licenses and/or concessions, in the consolidated financial statements. For more details, see the Consolidated Report on the Payments to Governments on our website.
OMV AG files a Country-by-Country Report (CbCR) with Austrian tax authorities for OMV Group which is part of the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan 13. In compliance with fiscal tax legislation in place, members of the OMV Petrom Group, acting as constituent entities of OMV Group, notify national authorities, where required, about the submission of the CbCR in Austria. The CbCR is an annual tax return that breaks down key elements of the financial statements by tax jurisdiction.
We continuously carry out risk reviews, which also include tax risks, in order to assess our current and future financial and non-financial risks, assess how these trends will impact OMV Petrom, and then develop appropriate responses. We report key risks internally at least twice a year to the Supervisory Board through a very clearly defined process. The Executive Board drives OMV Petrom’s commitment to the risk management program and sets the tone for a strong risk culture across the organization. We follow OMV Petrom’s risk management system as part of our internal control processes. We identify, assess, and manage tax risks by implementing risk management measures at the operational level with a robust and complex set of controls and procedures.
Taxation as a key steering instrument towards an eco-friendly, green economy plays a major role in the current initiatives of the EU, OECD member states, and the Romanian government.
For instance, several initiatives have been launched such as:
- The Fit-for-55 package by which the EU aims to reduce its net greenhouse gas emissions by at least 55% by 2030 will have an impact on the taxation of inefficient and polluting fuels.
- OECD/G20 inclusive framework on reforming international tax rules by implementing new rules for profit allocation (Pillar One) and establishing a global minimum taxation regime (Pillar Two) effective in 2023.
- Common European Council, European Parliament, and European Commission agreement on the proposed public country-by-country reporting (CbCR) directive. Considering the 18-month transposition deadline for member states, the public CbCR will enter into force in 2024 for the 2023 fiscal filing year.