Tax Strategy
The Management Team of HUGO BOSS firmly believes that paying tax is of central importance to global economic and social relationships. By paying its taxes, the company assumes responsibility for its actions in every country it operates in. Its tax payments are an important contribution to the expansion and maintenance of infrastructure and social cohesion in every one of these countries, as well as representing a cornerstone in the company´s commitment to conduct and develop its business in a sustainable, fair and cooperative manner across the world.
Despite the fact that there is not always absolute certainty regarding tax in international business transactions, which leaves some scope for interpretation, HUGO BOSS recognizes its clear responsibility in respect of local legislation. For this reason, tax compliance for HUGO BOSS is more than gearing our decision-making processes to the exact wording of the law. It also means taking into account the purpose of the tax law as well as the intentions of the legislator.
For this purpose, HUGO BOSS has drawn up the following guiding principles in the form of a tax strategy aimed at ensuring that legal obligations are met throughout the Group as a whole, as well as aligning it with our economic activities. The following tax strategy was developed by the Group Tax Department and approved by the management board and the Audit Committee.
– The Managing Board
Development of effective tax rate
| (In EUR thousand) | 2021 |
|---|---|
| Earnings before taxes | 196,874 |
| Anticipated income tax | 58,214 |
| Tax effects of permanent items | 1,744 |
| Tax rate-related deviation | (9,124) |
| thereof effects of changes in tax rates | 705 |
| thereof adjustments of tax amount to diverging local tax rate | (9,829) |
| Tax refund/tax arrears | 3,672 |
| Deferred tax effects from prior years | 614 |
| Valuation allowance on deferred tax assets | (1,579) |
| Tax effects from distributable profit of subsidiaries | (549) |
| Other deviations | (243) |
| Income tax earnings reported | 52,749 |
| Effective tax rate | 27% |
Breakdown of income tax accrued (current year) by country
The decline in sales due to the temporary store closings as well as the extensive restrictions on public life in many places and the resulting regionally very different earnings development are also reflected in the accrued income tax expenses for the 2020 financial year. Hereby the current tax expenses only reflect operations in the current year and do not include deferred taxes or provisions for uncertain tax liabilities.
Despite the COVID-19 pandemic and the negative sales trend, Germany, as one of the HUGO BOSS core markets, had the highest current income tax expenses (excluding aperiodic effects). The Chinese mainland was able to quickly return to growth after the lockdown in the first quarter and ended the financial year above the previous year's value, consequently resulting in the second highest current income tax burden in the 2020 financial year. Furthermore, the United States and Great Britain are among the core markets of HUGO BOSS Group, which is also reflected in their share of income tax accrued. The distribution of the current income tax accrued among the other countries corresponds to the respective course of business.
| Main countries of company’s operations | Income tax accrued 2020 |
|---|---|
| Germany | 30 % |
| China | 22 % |
| United States | 14 % |
| Great Britain | 7 % |
| Spain | 4 % |
| Italy | 4 % |
| Mexico | 4 % |
| Benelux | 2 % |
| Portugal | 2 % |
| Russia | 2 % |
| Other countries | 9 % |
| Result | 100 % |