Taxes are the most important source of income for governments, which they use, among other things, to fund general facilities. These general facilities, such as the railway infrastructure, are vitally important to NS.
Guiding principles for the tax policy
NS operates in accordance with tax and other laws and regulations. As such, given its duty to adopt a socially responsible approach to taxation, NS takes the position that the aim and the purpose of the law must be taken into account. This means that it does not merely observe the letter of the tax law. A responsible approach to taxation means that no structures should be set up that have tax savings as their primary goal. Transactions should only take place if they serve a genuine commercial purpose. That is the case if the tax consequences of such transactions are proportionate to the commercial consequences, both in a qualitative sense (regarding complexity) and in a quantitative sense (regarding the financial impact).
NS is an organisation with a prominent role in Dutch society, and all of its shares are held by the Dutch State. Being a State participation entails special responsibilities.
For the business operations where NS is in competition with other market parties, it is important to ensure a level playing field also from a tax perspective. Taxes are one component of the operating costs in franchises and these costs are therefore examined closely. On the one hand, we want to make sure that we are complying with the applicable tax legislation; on the other, we aim to make use of tax incentives, for example for research and development or sustainable investments.
Relationship with the tax authorities
NS believes it is important to have good relationships with the tax authorities in all countries where it has operations. For instance, in 2010 NS concluded a compliance covenant with the Dutch Tax and Customs Administration. This agreement enables ‘horizontal monitoring’ of NS by the Tax and Customs Administration. The core concepts are mutual trust, understanding and transparency. Pursuant to this covenant, prior to carrying out a transaction or submitting its tax return NS consults with the Dutch tax authorities on potentially contentious standpoints. The aim is to remain as up-to-date as possible so that NS has a clear view of its tax position at all times. NS discusses matters with the Dutch tax authorities on a quarterly basis.
It also takes a proactive approach to tax matters in other countries. If there is any uncertainty, the tax authorities are contacted so that agreement can be reached on important topics. In the United Kingdom, for example, Abellio has a Customer Compliance Manager at HRMC, should Abellio need to discuss current issues.
The Executive Board has an overview of all tax matters at NS. The tax function within NS is set up in such a way that all important decisions concerning tax matters are assessed by NS’s tax department and that the company complies with its tax obligations in all countries. The NS Tax department works with the Executive Board, the business units and the Dutch Tax and Customs Administration in a consulting and coordinating capacity. The department is also the first point of contact for tax matters for other internal and external stakeholders. Outside the Netherlands, the Tax department’s contacts with the tax authorities are generally arranged via the local subsidiaries. The Tax department reports to the NS Finance Director. The Tax department regularly engages the services of external tax consultants in order to obtain a second opinion on important tax issues, acquire specialist knowledge, improve understanding of new tax legislation and obtain assistance when setting up and modifying tax management processes.
Abellio manages its local tax obligations via its financial departments, and hires in external consultants where necessary for tax compliance and country-specific tax issues. External consultants are engaged mainly in the case of complex issues or issues where there is a great deal of uncertainty. The boards of Abellio in the United Kingdom and Abellio in Germany have a complete overview of domestic tax affairs and ensure regular communication and coordination with the Executive Board and NS Tax department.
Acceptability of tax risks and risk management
NS aims to ensure timely submission of correct tax returns and timely payment of any taxes due. However, given the extent of its operations and the associated tax obligations, common tax risks inevitably arise in its processes. The NS Executive Board has defined its risk appetite in eight thematic areas. Tax risks are covered by the themes of ‘Integrity & Compliance’ and ‘Reputation’. The risk appetite for both themes has been determined to be 'averse', which is deemed appropriate given NS’s duty to act responsibly in the matter of taxes. This governance should also provide for measures to control tax risks. To that end, the risks are identified, assessed and managed. The risks are discussed with the Executive Board, and measures are taken to make them compatible with NS's risk appetite.
NS is transparent about its tax position. The annual report shows the amounts paid by NS in corporate (income) tax, payroll tax and VAT per country. The financial statements also specify the effective tax rate for corporate (income) tax and give detailed information on deferred tax assets and liabilities.