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UPM Annual Report 2014
UPM Annual Report 2014
35
36
CONTENTS
STAKEHOLDERS 31–44
UPM’s economic impact is significant
in the surrounding communities. The
company’s operations contribute to
local, regional and national economies
by generating economic benefits for
different stakeholder groups. The
related direct monetary flows indicate
the extent of added value globally.
DIRECT ECONOMIC VALUE GENERATED AND DISTRIBUTED
BY UPM IN 2014 (EUR MILLION)
Economic value retained 909
Direct economic value created
Sales
9,868
Income from
sale of assets
158
Income from
financial investments
9
Other income
29
10,064
Economic value distributed
Operating costs
–7,413
Employee wages and benefits
–1,290
Payments to providers of loans
–51
Dividend distribution
–319
Corporate income taxes paid
and donations
–82
–9,155
UPM’S CORPORATE INCOME TAX IN FINLAND
REACHES NEARLY EUR 90 MILLION
UPM pays income tax where added value is created and profit generated. As a result,
especially in the countries where UPM’s different business areas have significant value-
adding operations, the company is also a major tax payer both of direct taxes (for example
corporate income tax, real estate tax) and indirect taxes (value added tax). In addition to
Finland, UPM has significant investments in production, for example in Uruguay, Germany,
China, the UK and the USA.
Corporate income tax particularly, which is based on the company’s taxable profits, is
directly proportional to the company’s profitability. UPM has worked systematically to
improve its profitability over the past few years, not only through increasing its cost
efficiency and making savings, but also by investing in new operations.
Corporate income tax is paid in accordance with local legislation. In some countries,
governments support companies making significant investments, for example by granting
temporary operating permits for special economic zones. In Uruguay, the government has
granted a permit to UPM’s pulp mill to operate in a free trade zone.
Finland’s corporate income tax rate decreased to 20% from the beginning of 2014. UPM’s
corporate income tax in Finland in 2014, estimated at nearly EUR 90 million, has been
calculated at the tax rate of 20%. In 2013, UPM’s corporate income tax in Finland was EUR
116 million at the tax rate of 24.5%.
UPM is one of Finland’s biggest tax payers
Despite the challenging operating environment, UPM has been able to improve its results
through its own actions year on year, and thus the amount of taxes paid has also increased.
Another reason for the large amount of taxes paid is that UPM has significant operations
in Finland through all of its six business areas. At the same time as some operations have
been reduced, new operations have been started and new service concepts have been
developed.
Investments have been made in production and service operations as well as in research
and development, which will contribute to the results in the future. For example, following
research work carried out in Finland, the production of biofuels has been started in
Lappeenranta.
Local investments and expertise can also be used in a completely new business environ-
ment, good examples of which include business premises and related services provided by
UPM to entrepreneurs in Kajaani and Kouvola, and the provision of forest management
services to an increasingly larger group of investors.
A certain amount of the corporate income tax paid by UPM in Finland is distributed to
regions where the company has significant operations, for example Lappeenranta, Jämsä,
Kouvola, Rauma and Tampere. In addition to this corporate income tax and real estate tax
paid by UPM, the taxes paid by the company’s own employees and indirectly-employed
contractors increase the tax revenue of the regions. The taxes are used to finance common
services and projects, with the purchasing power of UPM and its employees also adding
to the vitality of these regions.
Based on the standards of behaviour required
by UPM’s Code of Conduct, UPM’s tax policy
describes the main principles and guidelines of
taxation at UPM. UPM is committed to paying
all the relevant statutory indirect, direct and
other taxes and to file, report and disclose the
information required to comply with the pre-
vailing legal requirements and transparency
objectives of UPM.
The four main principles of UPM’s tax
policy, updated in 2014, are:
• Compliance with relevant statutory
legislations and rules.
• Management of tax risks, both financial
and non-financial.
• Transparency of tax issues and an overall
requirement of commercial rationale
concerning tax-related transactions.
• Continuous enhancement of shareholder
value by aiming for cost efficient and opti-
mal tax processes, business transactions and
structures.
UPM pays taxes where
value is created
All of UPM’s tax-relevant transactions are
based on commercial rationale. The location
of UPM’s group entities is driven by business
reasons, such as the location of customers,
suppliers, raw materials and know-how.
UPM recognises the importance of follow-
ing arm’s length standards as stated in the
OECD guidelines and in other standards.
Accordingly, transactions are taxed where
operations are performed and where value is
created.
Due to UPM’s corporate and operational
structure, UPM reports and pays its corporate
income taxes mainly in the production coun-
tries and in the countries where innovations
are being developed, in accordance with the
In addition to the enhanced relationship
with tax authorities, UPM has engaged in open
dialogue with various stakeholder groups inter-
ested in tax issues. UPM aims to develop tax
reporting that meets the expectations of various
stakeholders. UPM closely follows the develop-
ment of international and local guidelines and
recommendations for country-by-country
reporting, for example via OECD’s work on
tax reporting or other international corporate
responsibility initiatives as well as local
legislations.
UPM’s tax policy is available at
www.upm.comlocal tax legislation and regulations of the
country in question.
UPM’s significance to local tax revenue
is especially emphasised at the locations of
production sites. In addition to the taxes paid
by UPM, such as corporate income taxes and
real estate taxes, the local impact is augmented
by the taxes paid to the local municipalities
by UPM’s employees as well as those indirectly
employed to perform various services at the
production sites.
Work on developing
tax transparency continues
UPM supports transparency of tax issues
through sufficient and regular reporting on
taxes and by open communication with
authorities and other relevant stakeholders.
UPM aims to achieve a transparent, proac-
tive and professional relationship with tax
authorities in all the countries where it operates.
An enhanced relationship or co-operative
compliance, available in some countries, is one
example of a more structured way of improving
co-operation with tax authorities. OECD recom-
mends an enhanced relationship between tax
authorities and large taxpayers to enable the
real-time sharing of information on significant
tax matters to make sure that the correct tax is
paid when it is due and to avoid unnecessary
compliance costs.
In Finland, UPM participates in a voluntary
pilot project of enhanced relationship with
the Finnish tax authority, the Large Taxpayer’s
Office.
In 2014, the enhanced relationship started
with so-called compliance scans that included a
review of UPM’s current tax control framework
concerning all taxes supervised by the Large
Taxpayer’s Office. Through the pilot project,
UPM aims to achieve efficiency, cost savings
and certainty around tax issues in the long term.
UPM’s tax policy
promotes
compliance, risk management,
transparency and efficiency