Annual report 2016

Tax footprint

In its tax footprint reporting, Posti adheres to the country-specific tax reporting guidelines for companies of which the state is the majority shareholder, provided by the Ownership Steering Department on October 1, 2014.

Tax strategy

All companies in the Group have committed to operating responsibly and to meeting all obligations and requirements defined by the valid legislation of each country. Posti Group companies pay their taxes in the countries in which their actual business operations take place. All taxes are to be paid on time without delay. The Group’s long-term target is to ensure that the Group’s effective tax rate is at the same level as the corporate income tax rate valid in Finland at each particular time.

According to the Group’s tax strategy, taxation is always a consequence of business operations, which means that tax solutions must also be based on business needs. Posti does not practice tax planning that would aim at artificially decreasing the Group’s taxable income. In tax-related issues, the Group operates within the framework of legislation and legal practice in planning the taxable profit of Group companies. This can include the utilization of tax losses accrued in a subsidiary or the granting of group contributions, for example. In transfer pricing between subsidiaries, Posti aims to always ensure that the prices are market-based. To clarify taxation practices, some situations may involve contacting the tax authorities for either verbal guidance or a written decision on the taxation treatment of the planned action.

Management of tax-related issues

The management of tax-related issues is centralized to the Group Finance unit, which is responsible for managing and monitoring tax-related issues at the Group level. Decisions related to taxation are made at the Group level. Significant matters of principle are presented to the parent company’s Board of Directors for decision-making. The Group’s CFO reports regularly on taxation-related issues to the Group’s Audit Committee. The key task of the management of tax-related issues is to ensure that all Group companies comply with the regulations of tax legislation in all countries of operation. Tax risk management is part of the Group’s risk management process.

Principles observed in tax reporting

Posti reports its tax footprint openly and transparently. The Group highlights potential decisions by the tax authorities and appeals concerning decisions by the tax authorities where such decisions and appeals have a material impact on the Group’s tax position.

The information presented in this report is based on information collected from the Group’s accounting systems. Taxes refer to taxes or tax-like fees paid to public sector entities, whether they are paid or remitted by the company. The nature and amount of taxes vary significantly from country to country. Taxes payable refer to taxes paid by the Group companies which are, as a rule, expensed in the company’s Financial Statements. Taxes remitted refer to taxes or fees collected by the companies which are remitted to tax collectors, often on behalf of parties other than the company itself.

The company has restricted its tax reporting to only cover substantial operating countries. Based on this decision, country-specific tax information is only presented for Finland and Russia. Nearly 85% of the Group’s net sales comes from these countries. According to the Group’s strategy, these countries are its main markets. Other operating countries are grouped under Scandinavia and Other countries. Posti also uses the same geographical categorization in its Consolidated Financial Statements.

For countries other than Finland and Russia, information is presented on a country group-specific basis as the information reported is not of material importance and the presentation of country-specific information might jeopardize the non-disclosure of confidential information, such as customer or pricing details. From the Group’s perspective, the amount of information reported is not of material importance when the taxes payable for an individual country do not exceed EUR 5 million.

The Group operates in ten countries. In addition, Posti has companies in countries where the Group no longer has business operations. When assessing the materiality threshold, net sales of EUR 1 million for each individual subsidiary is considered the threshold for non-materiality. Non-material companies are excluded from the reporting, as the amount of taxes paid by the companies is minor in proportion to the figures disclosed by the Group. These companies are in the categories Scandinavia and Other countries.

Posti does not have any operations in countries classified as tax havens, where the corporate income tax rate is significantly lower than the Finnish corporate tax rate. The information presented below is based on the financial statements of separate companies and the information has not been consolidated except net sales.

The Group's tax footprint

 

2016, MEUR

Finland

Russia

Scandinavia

Other countries

Net sales

1,261.9

104.6

133.2

107.7

Result before taxes

-191.3

-3.2

7.2

0.5

Number of personnel

14,141

2,468

375

1,539

Paid taxes

46.3

6.8

5.0

3.4

Remitted taxes

261.7

8.0

16.7

6.8

Received public support

0.1

0.0

0.0

0.1

         
         

2015, MEUR

Finland

Russia

Scandinavia

Other countries

Net sales

1,265.3

118.5

140.4

126.1

Result before taxes

133.9

-14.6

-9.7

0.6

Number of personnel

16,874

2,809

417

1,498

Paid taxes

43.7

7.5

5.6

5.0

Remitted taxes

274.8

10.4

13.5

6.8

Received public support

0.1

0.0

0.0

0.2

         
         

Remitted taxes by category and by geographical area


Remitted taxes 2016, thousand EUR

Total

Finland

Russia

Scandinavia

Other countries

Value added taxes

165,150

148,659

4,862

10,083

1,546

Salary taxes

127,560

112,920

2,878

6,627

5,135

Other taxes

548

165

300

0

83

      

Remitted taxes 2015, thousand EUR

Total

Finland

Russia

Scandinavia

Other countries

Value added taxes

172,389

155,400

6,505

8,918

1,566

Salary taxes

132,154

119,262

3,206

4,463

5,223

Other taxes

830

79

646

88

17

      

 

The Group’s tax position in 2016

In 2016, the Group’s effective tax rate was 21.5 percent (2015: 17.1 percent). The effective tax rate is calculated based on accrual-based income taxes and changes in deferred taxes. The increase in the tax rate was primarily attributable to changes in deferred taxes associated with the utilization in Finland of tax losses recognized by foreign subsidiaries. The Group’s accrual-based income taxes for the financial year, excluding the effect of changes in deferred taxes, amounted to EUR 4.4 million. The Group received tax refund for previous financial years amounting to EUR 3.8 million.

Posti Group Corporation has lodged an appeal with the Board of Adjustment in Large Taxpayer’s Office regarding a decision made by the Large Taxpayer’s Office in 2015 to reject the utilization of tax losses by a foreign subsidiary that was merged with the company. The appeal concerns capital amounting to EUR 39.0 million. The matter is still pending in the Board of Adjustment.

In a decision made in October 2016, the Large Taxpayer’s Office partly rejected Posti Group Corporation’s claim to deduct in taxation the tax losses of a foreign subsidiary that was merged with Posti Group Corporation in 2015 as well as the deductibility of losses on the disposal of a foreign property company. The total value of these items is approximately EUR 20 million. The company considers the tax authorities’ decision erroneous and has lodged an appeal with the Board of Adjustment in Large Taxpayer’s Office. At the same time, however, the Large Taxpyer’s Office approved approximately EUR 36 million of the merged foreign subsidiary’s tax losses as deductible.

Posti Ltd was informed in January 2017 of the tax authorities’ decision, according to which the adjustment to the recognition of revenue from pre-paid services is a deductible expense in the company’s income taxation for 2016. This adjustment reduced the company’s income taxes payable by EUR 5.3 million.

Taxes by category and by geographical area


Paid taxes 2016, thousand EUR

Total

Finland

Russia

Scandinavia

Other countries

Income taxes

18,254

17,878*

319

16

41

Real estate taxes

2,868

1,931

937

0

0

Employer taxes

24,956

11,035

5,585

4,976

3,360

Environmental taxes

13,516

13,482

0

0

34

Other taxes

1,970

1,970

0

0

0

      

*) includes income tax in the amount of EUR 10,188 thousand paid during 2016, but allocated to 2015.

      

Paid taxes 2015, thousand EUR

Total

Finland

Russia

Scandinavia

Other countries

Income taxes

18,092

16,061

345

490

1,196

Real estate taxes

3,675

2,588

1,087

0

0

Employer taxes

26,278

11,240

6,082

5,115

3,841

Environmental taxes

13,184

13,184

0

0

0

Other taxes

567

567

0

0

0