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 company with the purpose of driving change to defeat serious chronic diseases. 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 profit margin based on activity performed or alternatively a profit margin agreed in an advance pricing agreement. 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.

Novo Nordisk’s 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.

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 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 tax authority.

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 compliant.

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 a conclusive answer on the correct interpretation.

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 in terms of tax.

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. Our tax policy and contributions are intrinsically linked to promoting investment, job creation, and economic development in an effort to facilitate the achievement of the UN Sustainable Development Goals.

Approved by the Board of Directors of Novo Nordisk A/S

August 2023