Our company operates in a complex legal environment and is subject to various tax obligations due to its domestic and foreign business activities. It is our responsibility to ensure compliance with tax legislation in all countries in which we operate and to be transparent. To this end, we have a tax organization in place that clearly defines responsibilities, processes and controls.
Our approach to taxes
We believe that fair taxation serves as a backbone of any functioning society. Therefore, we expect public authorities to take transparency, predictability and non-discrimination into consideration when implementing taxation measures. We understand that tax is embedded in almost every aspect of commercial operations and our company therefore acts as a responsible taxpayer with respect to the following objectives:
- Ensuring timely and proper execution of tax obligations;
- Securing material correctness of tax positions determined in the annual financial statements and tax declarations;
- Ensuring effective tax risk management and tax monitoring;
- Avoiding inappropriate structuring leading to benefits not provided for by tax law.
Roles and responsibilities
Taxes are managed in different units within Merck KGaA. Group Tax is generally responsible for tax matters of Merck KGaA and provides tax standards for the Merck Group – with the exception of customs, consumption tax and wage tax. The Export Control and Customs Regulations unit within the Corporate Sustainability, Quality and Trade Compliance (SQ) function is responsible for customs and consumption tax. Human Resources is responsible for wage tax. Certain tax tasks are managed by other units of Merck KGaA or Merck Business Services (MBS).
The Group Chief Financial Officer (CFO) is responsible for the Group Tax function. He delegates his tasks related to tax matters to the Head of Group Tax. The Head of Group Tax is also responsible for defining the organizational structure of the function, for monitoring it on an ongoing basis and for adapting it if necessary. In addition, the local tax unit in the United States reports directly to the Head of Group Tax.
At the subsidiary level, the local CFO is generally responsible for tax matters, managed either by local tax units, by external advisors, or, for Germany and our U.S. subsidiaries, by Group Tax. The local CFOs report to the regional CFO. The regional CFO ultimately reports to the Head of MBS, who reports to the Group CFO. If no local CFO is assigned, the tasks are undertaken by a designated employee in the Finance unit.
Tax-related topics can also be reported through our compliance hotline, our Group-wide whistleblowing system.
Our commitment: a tax principle
Our Tax Principle is part of our tax internal control system. It represents the framework and minimum requirements for all tax-relevant processes, methods and structures within our company. This principle
- outlines the tax compliance culture within the Group;
- defines our tax compliance objectives;
- specifies the organizational framework for tasks, roles and responsibilities, which ensures compliance with tax rules within the Group;
- establishes basic rules for the exchange of tax-relevant information.
The Tax Principle was issued by the Executive Board and applies to the entire Group. We review it at least once a year and modify it if necessary. In the event of extraordinary events, such as changes to the business strategy, organizational structures or risk management processes, the principle is reviewed on an ad hoc basis and adapted as appropriate. The Head of Group Tax is responsible for annual and ad hoc reviews, as well as modifications to the principle. Any modifications are discussed and coordinated with the Group CFO.