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
Although fiscal year 2021 was once more impacted by the implications of the COVID-19 pandemic, HUGO BOSS recorded a noticeable recovery in global business activity over the course of the year. This led to significant improvements in sales, EBIT, and an increase in associated income tax expenses.
In addition to the swift return to sales and earnings growth, this year’s management activities focused on the implementation and successful execution of the “CLAIM 5” growth strategy.
Despite the COVID-19 pandemic, Germany, as one of the core markets of HUGO BOSS, had the highest revenue1 and current income tax expenses (excluding aperiodic effects). In this context, the current tax expenses only reflect operations in the current year and do not include deferred taxes or provisions for uncertain tax liabilities. As Great Britain, the United States, and mainland China are among the core markets of HUGO BOSS, this is also reflected in their share of revenue1 and income tax accrued. The distribution of revenue1 and current income tax accrued among the other countries corresponds to the respective course of business.
| Main countries of company’s operations | Sales 20211 | Earnings before tax 20211 | Income tax accrued 20211 | Number of Employees 2021 | Primary Activities |
|---|---|---|---|---|---|
| Germany | 31% | 62% | 37% | 22% | Management activities, supply unit, development and design, production, procurement, sales |
| Great Britain | 8% | 9% | 15% | 5% | Sales, support services |
| China | 6% | 6% | 14% | 10% | Sales, support services |
| United States | 11% | 5% | 11% | 6% | Sales, support services |
| Switzerland | 14% | 10% | 3% | 3% | Supply unit, Trademark unit, development and design, production, procurement, sales |
| Mexico | 2% | 2% | 3% | 2% | Sales |
| Russia | 2% | 1% | 3% | 2% | Sales |
| Benelux | 3% | (2)% | 2% | 2% | Sales, Finance Unit |
| Canada | 2% | 1% | 2% | 2% | Sales |
| Australia | 1% | 0% | 2% | 2% | Sales |
| Turkey | 3% | 1% | 1% | 26% | Production, sales |
| Spain | 2% | 0% | 1% | 3% | Sales |
| France | 4% | (1)% | 0% | 3% | Sales |
| Italy | 1% | 0% | 0% | 2% | Production, sales |
| Other countries | 10% | 6% | 6% | 10% | |
| Result | 100% | 100% | 100% | 100 % |
1 Figures are based on the separate financial statements of the respective subsidiaries included in the consolidated financial statements.