Stora Enso Oyj – Annual report – 31 December 2023
Industry: forestry, manufacturing
Stora Enso as a taxpayer
Stora Enso aims to be transparent with respect to economic value generation. For this purpose, Stora Enso makes a voluntary commitment to provide information on the Group’s tax approach and details of the corporate income taxes paid by the Group. Beginning in 2023, Stora Enso has adopted the GRI 207 standard as the framework for its tax disclosure. This means that the Group describes its tax policy and approach to tax and explains its processes around tax governance, controls, and risk management. Moreover, Stora Enso describes how it engages with stakeholders and deals with any concerns there may be related to tax. The Group also discloses the corporate income taxes paid and accrued, and other financial information according to the reporting requirements of the GRI 207-4 standard on country-by-country information.
Tax policy
The Stora Enso Tax Policy addresses the Group’s tax strategy, including approach to tax, tax governance, compliance, tax risk management and tax authority co-operation. The Tax Policy has been approved by the President and CEO of Stora Enso and is reviewed annually. This report discusses the principles of the Tax Policy.
Approach to tax
As a responsible and prudent taxpayer, Stora Enso is committed to ensuring that the Group observes the letter and the spirit of applicable tax laws, rules and regulations, including international transfer pricing guidelines and local legislation in all jurisdictions where it conducts business activities or has otherwise any tax obligation. In addition to legal and regulatory requirements, the tax principles comply with Stora Enso’s values to ‘Lead’ and ‘Do what’s right’.
The strategic priorities of Stora Enso’s tax function are confirmed annually by the Group CFO. Integrated business partnering and inspired people with the right skills are at the core of Stora Enso’s tax strategy. This is the basis for ensuring tax compliance with streamlined processes and advanced technology, and facilitating an early detection of tax risks, regulation changes, and improvement opportunities.
Stora Enso seeks to ensure that the tax strategy is aligned with the Group’s business and commercial strategy. Stora Enso only undertakes tax planning that is duly aligned to economic activity and does not take aggressive tax planning positions. This means that all tax decisions are made in response to commercial activity, and tax is one of many other factors that are considered when making business decisions. Stora Enso has an obligation to manage tax costs as part of the Company’s financial responsibility to societies and shareholders. Stora Enso may therefore respond to tax incentives and exemptions granted by governments on reasonable grounds, and currently has operations in countries that offer favourable tax treatments, where their location also is justified by sound commercial considerations.
Stora Enso has operations in the following locations that offer favourable tax treatments:
- The joint operation Montes del Plata operates a pulp mill in a Special Economic Zone with favourable tax treatment in Uruguay. As of 2024 the operations may become subject to additional tax in accordance with the minimum tax legislation having entered into force in multiple jurisdictions following the OECD Pillar Two rules.
- Stora Enso’s two forestry companies in Guangxi, China are entitled to exemption from corporate income tax from forestry income and value added tax on their sales, and Stora Enso’s related industrial company is entitled to reduced corporate income tax rate until 2025. In December 2022, Stora Enso initiated a sales process for a possible divestment of these forestry and consumer board production operations.
- Stora Enso conducts business, mainly consisting of sales support services, in the United Arab Emirates, Singapore, and Hong Kong.
- AS Stora Enso Latvija has been granted a corporate income tax credit relating to an investment project. The credit was fully utilised in 2023 and not available for future years.
Tax governance, control, and risk management
Stora Enso acts, as part of protecting shareholder value, with integrity in all tax matters. The Group’s Tax team, reporting to the Group CFO, works closely with the businesses and other internal stakeholders to identify and manage business and compliance tax risks to ensure a sustainable yet business feasible platform for operations. In addition to performing the mandatory Group level tax disclosure processes, the Tax team consolidates annual and quarterly tax reporting describing the Group’s tax position to shareholders and other stakeholders. The Group’s Tax team regularly reports key tax matters to the Group Leadership Team and the Finance and Audit Committee of the Board of Directors.
Tax affairs are managed under an extensive set of Group policies such as Stora Enso Code, Business Practice Policy, Supplier Code of Conduct, and Tax Policy. Stora Enso’s internal allocation of responsibilities of tax matters and the engagement of external resources are described in the internal tax responsibility guidelines. Internal stakeholders are continuously trained on tax-related matters in order to enhance capabilities and improve overall tax compliance and quality of tax reporting. Compliance processes are subject to internal controls, and tax risks are annually reviewed as part of the Group’s enterprise risk management process. The Tax team is involved in business changes already in the planning phase to ensure the alignment and appropriate compliance of tax rules and regulations. The Tax team monitors changes in tax legislation and regularly reviews tax affairs and risks with stakeholders to ensure that Stora Enso can sufficiently identify, assess, and mitigate tax risk.
In case employees have any concerns about unethical or unlawful behaviour or the Company’s integrity, the anonymous Speak Up Hotline can be used to report any suspected cases also regarding tax matters. All reported cases will be subject to an established investigation and reporting process, with proven cases leading to actions.
The Group’s tax disclosures are included in the assurance process of the Annual Statements. This ‘Stora Enso as a taxpayer’ report is subject to limited assurance.
Stakeholder engagement and concerns related to tax
Stora Enso’s commitment to tax transparency is also reflected in the Group’s relationships with tax authorities and governments. To build confidence whenever possible, Stora Enso seeks to work positively, proactively and openly with tax authorities on a global basis, utilising transparent advance processes in order to minimise potential disputes. Stora Enso also works with government representatives, mainly through associations, by providing corporate views and impacts at request to aid law-making and implementation. Stora Enso readily responds to investor enquiries, and constantly follows the development of tax sustainability and transparency expectations.
Country-by-country reporting of income taxes in 2023:
How to read the report
The country-by country data is reported as required in the GRI 207-4 standard. However, while the reporting required in GRI 207-4 is based on the data in Stora Enso’s consolidated Financial Statements, the reporting is unconsolidated and does not fully reconcile with the consolidated Financial Statements. The financial information in the CbC report is the sum of the legal entities’ local standalone IFRS reported balances in each country. Group level consolidation adjustments, such as elimination of group internal transactions, are excluded. Due to this the financial information is different than what is presented in the consolidated financial statements for 2023.
Also, the definitions used in the GRI 207 may differ from the standard definitions used in other reporting areas.
Country-by-country information for financial year 2023
Names of the resident entities can be found in note 6.2 Group companies in the Financial report.
1 Revenues from third-party sales is the total amount of revenue from domestic and foreign external parties of the entities in the jurisdiction.
2 Revenues from intra-group transactions with other tax jurisdictions provides the total amount of cross-border revenue from other group entities.
3 Profit/loss before tax is the total amount of the group entities’ profit or loss before tax in the jurisdiction, as reported under IFRS.
The reported amounts include temporary and permanent differences between accounting and taxation, such as non-taxable dividends from other group companies, and thus do not represent the taxable income on which taxes are calculated in the jurisdiction’s taxation.
4 Corporate income tax paid on a cash basis contains the total of corporate income taxes paid during the reported period by the companies in the jurisdiction to the home jurisdiction and all other jurisdictions. The amount contains tax payments for previous years and excess payments refundable in following years.
5 Corporate income tax accrued on profit/loss is the IFRS reported current tax expense of the reported period. The amounts do not include deferred taxes from temporary differences and tax losses, and thus do not represent the total tax expense of the entities in the income statement. The amounts do not contain taxes from previous periods.
6 Number of employees is the total average number of employees in the jurisdiction during the year.
7 Tangible assets other than cash and cash equivalents states the total of IFRS reported values of tangible assets in the entities of the jurisdiction.
8 Primary activities in the jurisdiction lists the main activities of all group entities in the jurisdiction.
9 Reasons for differences between income tax accrued and tax as per statutory rate explains the main reasons for the difference between the reported corporate income tax accrued for the year (5), and the amount of tax when applying the jurisdiction’s statutory corporate income tax rate to the profit/loss before tax (3). The reasons for differences may come from several sources, many of which are reporting technical. For example, profit/loss before tax (3) may contain items that will become taxable earlier or later than they are recognised in bookkeeping, creating timing differences on which deferred tax is recognised. In addition, differences may be due to utilization of tax losses or incurring new loss, for which deferred tax is also normally recognised. However, as per the standard, the accrued income tax (5) is reported here excluding deferred taxes, which creates a timing related difference between tax accrued and tax as per the statutory rate. Other main reasons for differences listed in this column may be tax exempt items such as group internal dividends, costs not deductible for tax purposes, favourable tax treatments (see previous page), and taxes from previous years.
Accounts examples 