Tax Strategy
HUGO BOSS firmly believes that paying tax is of central importance to our global economic and social relationships. By paying taxes, the company assumes responsibility for actions in every country it operates in.
The fiscal framework of globalized business is often complex and subject to interpretation by authorities and corporate management. Recent international developments have also led to tax legislation changing more quickly than previously.
Aside from complying with tax regulations, having adequate risk management structures in place is crucial. Clearly defined roles and responsibilities further enable taxes to be handled in a professional and targeted manner. For HUGO BOSS, this includes fair cooperation in the spirit of partnership with local financial authorities.
For this purpose, HUGO BOSS has drawn up 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 Managing Board
Development of effective tax rate
| (In EUR thousand) | 2020 |
|---|---|
| Earnings before taxes | (273,236) |
| Anticipated income tax | (80,741) |
| Tax effects of permanent items | 5,076 |
| Tax rate-related deviation | 13,109 |
| thereof effects of changes in tax rates | 389 |
| thereof adjustments of tax amount to diverging local tax rate | 12,720 |
| Tax refund/tax arrears | 5,055 |
| Deferred tax effects from prior years | (1,431) |
| Valuation allowance on deferred tax assets | 5,925 |
| Tax effects from distributable profit of subsidiaries | 135 |
| Other deviations | (1,182) |
| Income tax earnings reported | (54,054) |
| Effective tax rate | 20% |
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 % |