We are committed to being a sustainable business. To achieve this
ambition, we do business in a financially, environmentally and
socially responsible way (the Triple bottom line), always keeping in
mind what is best in the long term for the patients we serve, our
shareholders, our employees, the communities in which we are present
and the global society we are part of.
Our overall guiding principle within tax is to have ‘a
sustainable tax approach’, emphasising our business anchored
approach to managing the impact of taxes while remaining true to
the Novo Nordisk values of operating our business in a responsible
and transparent manner.
Novo Nordisk is a multinational company with a vision to bring
life-saving medicine to people in need globally. As a global company,
a fundamental prerequisite for running our operations across many
countries and affiliates is to trade products and services across
borders within the Novo Nordisk group of companies. Such cross-border
trading is subject to transfer pricing regulations.
Transfer pricing legislation has the purpose of ensuring a fair
split of corporate tax revenue between jurisdictions by restricting
multinational companies from artificially shifting profits between
jurisdictions. Many countries have implemented standards developed by
OECD in their domestic transfer pricing regulations. We follow the
OECD principles on transfer-pricing and any local requirements, if
they deviate from the OECD standard.
We utilise a so-called principal structure for transfer pricing
purposes. A principal structure means that all legal entities, except
for the principals, perform their functions on contract on behalf of
the principals. As a result, entities contracted by the principals are
allocated an operating profit according to a benchmarked net profit
margin based on activity performed or alternatively an operating
profit agreed in an advance pricing agreement1. The
remaining residual profit is subsequently allocated to the principals.
The Board of Directors approves the Novo Nordisk tax policy annually
and the Audit Committee monitors key tax risks on an ongoing basis.
Business anchored tax approach
legal and business structures are based on business anchored
considerations and business substance. Consequently, we pay taxes
where value is generated. This means that taxes are a consequence of
business anchored considerations while always respecting
international and domestic tax rules.
Being a global company means that we also do business in low-tax
jurisdictions if there is a local demand for our products. In some
jurisdictions where we operate, tax incentives are offered, and our
tax approach does not prevent us from making use of such incentives in
so far as our activities are business-driven and not motivated by tax considerations.
Responsible tax approach
As part of our
sustainable approach to tax, we are committed to managing taxes in a
responsible way. In recognition of this, we for instance do not use
artificial structures or tax havens to reduce our tax payments.
We aim to not only comply with the letter of the law, but also the
underlying policy intent. When making decisions on tax, we will not
take a position in our tax returns unless we feel comfortable that the
position we take will be upheld in a court of law if challenged by a
We conclude advance pricing agreements in many of our key markets.
Putting in place advance pricing agreements ensures that both Novo
Nordisk and the involved tax authorities can agree to the intra-group
pricing of our transactions and avoid unnecessary conflict. In
addition to concluding a substantial number of advance pricing
agreements, we engage in dialogue with tax authorities on for example
binding rulings and new legislative initiatives to ensure common understanding.
To ensure continuous compliance with our global tax obligations and
adherence to our tax approach, we employ qualified tax experts in Novo
Nordisk and we continuously monitor new tools and solutions that can
help us maintain a high-quality compliance standard. We monitor new
legislation and regulatory developments on an on-going basis and
assess the impact on Novo Nordisk in order to remain complaint.
Where possible, we seek to clarify any tax uncertainties with the
relevant tax authority before deciding on the appropriate tax
treatment. Where we disagree with the position of a tax authority, we
will inform the tax authorities thereof and make our views known. If
we ultimately fail to come to terms with the tax authority, we will
not refrain from bringing cases to the courts to achieve an assertive
answer on the correct interpretation.
Tax transparency and governance
As part of our
sustainable approach to tax, we are committed to transparency, and
we will continue to be open about our tax practices. We also
maintain professional and cooperative relationships with local tax
authorities built on mutual trust and dialogue.
Tax risks are monitored, and adequate controls enforced globally
through standard tax governance systems and risk reporting and
monitoring tools with regular reporting to the Audit Committee and the
Board of Directors. Tax risks are managed by our global tax
organisation ensuring timely involvement of qualified specialists.
The landscape for environmental, social and governance (ESG)
reporting frameworks is rapidly developing, and we will continuously
assess which framework(s) are most suitable for Novo Nordisk to report against.
We report on the Stakeholder Capitalism Metrics published by the
World Economic Forum, and thus report on our total tax contribution in
accordance with this standard. Furthermore, we share insights in the
annual report on our tax policy and our corporate taxes paid on a
region-by-region basis in line with our segmented business reporting dimensions.
Approved by the Board of Directors of Novo Nordisk A/S | 4
1Advance pricing agreements are ahead-of-time agreements
between tax authorities in two or more countries, determining the
appropriate intra-group pricing for certain transactions for a
predetermined amount of time.
The total tax contribution in 2020 amounted
to DKK 26,376 million split with 52% on taxes borne and 48% on taxes
collected. In 2019, the split was 54% on taxes borne (DKK 14,829
million) and 46% on taxes collected (DKK 12,698 million).
The overall decrease in total tax contribution from 2019 to 2020 is
primarily related to 'Corporate income taxes paid'. This is mainly due
to less prepayment in Denmark as a consequence of acquisitions in the
end of 2020.