Cyber Security Evaluations Limited’s UK Tax Strategy
Huawei is a leading global provider of information and communications technology (ICT) infrastructure and smart devices and has been operating in the United Kingdom (hereinafter referred to as “UK”) since 2001. Huawei is proud to support economic growth through its investment, procurement, employment and partnerships – all helping to build a better connected UK through the delivery of innovative and transformative ICT solutions.
Huawei recognises its duties as a responsible corporate citizen, and is committed to complying with all applicable tax laws and regulations in every market where it operates. Huawei does not engage in any aggressive tax planning, including how subsidiaries are financed and how the legal structure is arranged. It seeks a fair and stable tax policy framework and actively contributes to forums directed towards the development of good tax practice by engaging with industry bodies and Tax Authorities.
Huawei is organised by Business Group. Where a Business Group has operations in the Group’s markets, it is required to comply with Huawei’s high tax governance standards.
This Tax Strategy articulates the tax governance standards in relation to the tax affairs of Cyber Security Evaluations Limited (hereinafter referred to as "CSEL") in the UK. The contents of the strategy are aligned with Huawei’s global tax management policies and supporting operational mechanisms, and is prepared with specific reference to UK tax laws and regulations or accepted practice and the tax principles endorsed by CSEL’s Board of Directors (hereinafter referred to as “CSEL BOD”). In particular, the contents are prepared with specific reference to the UK legislation, and are therefore considered to be compliant with the Group’s / CSEL's obligations under paragraph 22(2) of Finance Act 2016, Schedule 19 (Publication of Tax Strategies). It covers all types of taxes relevant to the company including corporation tax, VAT, withholding taxes, employment taxes, customs duties and other taxes.
This Tax Strategy relates to the financial year ending 31 December 2021 and should be read together with other publicly available documents relating to Huawei’s systems of Corporate Governance, and in particular Huawei’s Internal Control mechanism, which is based on the COSO framework.
The general principles underlying CSEL’s approach to managing its tax affairs:
The general principles are as follows:
Approach to Tax Governance: Tax is recognised as a core part of CSEL’s corporate responsibility. CSEL’s BOD have oversight responsibility for managing tax with operational execution delegated, as appropriate, to senior management in the business segments and supporting functions.
Approach to Tax Compliance: CSEL recognises its duties as a responsible corporate citizen, and seeks to pay all taxes in accordance with the relevant laws and regulations in the UK. The objectives are to submit complete, accurate and timely tax returns and to pay the right tax at the right time and in the right place, based upon a sound application of the applicable law and regulations taking into account the documented intent of the law, or intent of the law as evidenced by Parliamentary proceedings as well as the letter of the law.
Approach to Tax Risk: CSEL’s objective is to achieve a high degree of certainty in relation to tax compliance by seeking to manage both operational risks arising from tax compliance processes and activities, and legislative risks arising from uncertainties in the interpretation of tax laws and regulations. Huawei deploys a Tax Control Framework (hereinafter referred to as "TCF") as the primary mechanism to help manage these risks.
Attitude to Tax Planning: CSEL’s business model is driven by commercial considerations. Any tax planning must support business activities, be in the long-term interest of CSEL and have genuine business substance.
Relationships with Tax Authorities: CSEL seeks to develop constructive relationships based on mutual respect and trust with the UK Tax Authorities (hereinafter referred to as "HMRC"). CSEL maintains its relationship with HMRC and handles enquiries and tax audits in a co-operative and professional manner.
Approach to Tax Governance and Compliance – Huawei’s Tax Control Framework
An overview of Huawei’s Internal Control Framework can be found in the “Internal Control” section of the Huawei website (http://www.huawei.com/en/about-huawei/corporate-governance/internal-control). In support of the Group’s Internal Control Framework, Huawei has established a Tax Control Framework (TCF), which has been designed to ensure that its tax affairs are managed in line with this Tax Strategy. A summary of the key supporting elements of the TCF are described below:
| People & Organisation
|| Policies & Governance
||Processes & Controls|| Information & IT
The organisation structure established to manage Huawei’s tax affairs and the skills and competencies of Huawei’s people.
This component of Huawei’s TCF supports the delivery of the Tax Strategy by ensuring that the Tax Management Department, country tax function and the wider tax function embedded in the business are organised in an optimal way and have the required skills, capabilities and experience.
The overarching framework adopted by the Board and its supporting layers at Business and Function levels to manage the Group’s tax affairs.
This component of the TCF supports the delivery of the Tax Strategy by setting out the boundaries within which Huawei must manage its tax affairs.
The Processes established to manage Huawei’s tax affairs including managing transactions and discharging Huawei’s tax compliance and reporting obligations, and the controls designed to mitigate or eliminate the risks arising from Huawei’s activities.
This component of the TCF supports the delivery of the Tax Strategy by ensuring that process and control activities are established, executed and monitored so that processes operate in the way that was intended.
The technologies and systems employed to facilitate effective tax management and to manage data in support of Huawei’s tax compliance and reporting obligations.
This component of the TCF supports the delivery of the Tax Strategy by helping to improve the integrity of data used for tax purposes, and the effectiveness and efficiency of tax processes including assurance over these processes.
· A Group Tax Management Department has been established to support effective tax compliance.
· The President of the Tax Management
Department, as a Global Process Owner for tax, reports directly to the Group CFO and is accountable for ensuring the effectiveness of the Group’s tax operational architecture (tax policies, guidelines and processes).
· Country management teams are responsible for ensuring effective compliance with local tax laws and regulations. They are supported by teams of appropriately qualified and experienced tax professionals, including external tax advisers.
· In the UK, CSEL’s BOD are ultimately responsible for ensuring that CSEL complies with all applicable tax laws and regulations in the UK.
· A Tax Management Policy, supporting functional policies and guidelines have been developed to guide Country Tax management teams.
· The CSEL BOD maintain oversight over CSEL's tax affairs and endorse the company’s approach to tax risk management.
· The CSEL BOD generally meet quarterly to discuss business matters, including where required tax related subjects, and seek assurance from senior management that they are responding appropriately to any identified tax risks.
· Global tax processes have been developed for the benefit of all companies in the Group.
· Appropriate control activities have been established to manage tax risks arising from these tax processes.They are embedded in the relevant tax processes, where appropriate, and are designed to either prevent or detect risk events.
· Country management teams are responsible for the localisation of tax processes, and for implementing the controls used to manage any tax risks.
· IT systems have been developed to support effective tax compliance.
· These systems have been integrated, where possible, into Huawei’s overall systems architecture to ensure the completeness and accuracy of tax compliance.
· Controls have been established to ensure the integrity of data and the accuracy of calculations used for tax compliance purposes.
| Monitoring, testing & maintenance
| The monitoring, testing and maintenance employed to provide demonstrable assurance of the operational effectiveness of the TCF and its continuous improvement.
· Huawei’s tax operational architecture (policies, guidelines, processes and supporting IT systems) is periodically reviewed and updated to ensure that it continues to fully support Huawei’s tax compliance objectives.
· The operational effectiveness of processes are constantly monitored and tested to ensure that they can be relied upon for tax compliance purposes. Where these activities identify anomalies, steps are taken to correct any errors, identify the root cause and establish a remediation plan to prevent a recurrence.
· The results of any monitoring and testing activities are communicated, as appropriate, to senior management at Group, Regional and Country levels.
Approach to Tax Risk
CSEL’s objective is to achieve a high degree of certainty in relation to tax compliance by seeking to manage both operational risks arising from tax compliance processes and activities, and legislative risks arising from uncertainties in the interpretation of tax laws and regulations. Huawei deploys a TCF as the primary mechanism to manage both these risks. The TCF is designed to provide assurance that Huawei’s tax compliance and disclosures can be relied upon and that its tax affairs are properly controlled in accordance with CSEL’s tax strategy. The TCF consists of various elements, including this Tax Strategy, a tax management department comprising of appropriately qualified and experienced tax staff, and suitable operational architecture.
It is recognised however that tax laws and regulations can sometimes be unclear, and where appropriate supplementary professional advice from external tax consultants is sought. Furthermore, to obtain enhanced tax certainty, mechanisms including Tax Rulings and Advance Pricing Agreements may be used, where appropriate.
Attitude towards Tax Planning
CSEL’s business model is driven purely by commercial considerations. Transactions must support business activity and have genuine commercial substance, and this means that CSEL does not engage in any aggressive tax planning.
In particular, CSEL conducts intragroup transactions on an arm’s length basis and complies with its obligations under local transfer pricing rules, including preparation of transfer pricing documentation.
Any significant transactions must be considered and approved by the CSEL BOD.
Approach to dealing with the UK Tax Authorities (HMRC)
To support a constructive relationship based on mutual respect and trust, CSEL seeks to engage with HMRC in a co-operative and professional manner. This is achieved, where appropriate, through:
- Regular meetings with HMRC to discuss significant matters such as changes to tax laws and regulations, business issues and significant transactions and to agree the interpretation of tax laws, regulations and practices.
- Meetings to describe the mechanisms CSEL deploys to provide assurance that its tax control activities are robust and that the tax returns and disclosures can be relied upon to be complete and accurate.
- Engagement with HMRC to address enquiries or tax audits in a co-operative and professional manner.
Approved by CSEL Board of Directors on 23 December 2021