Entities of the Group pay taxes in more than 60 regions of the Russian Federation thus having a significant impact on the income of some Russian regions. Foreign-based entities of the LUKOIL Group operate in more than 45 jurisdictions. LUKOIL companies in Romania, Bulgaria, Italy and Belgium are the largest taxpayers among other foreign-based entities of LUKOIL.
Tax Policy
LUKOIL strictly complies with requirements of the applicable tax legislation of the Russian Federation, international treaties and laws of foreign jurisdictions where entities of the Group operate, as well as follows provisions of international laws and directives. Entities of the Group do not conclude any transactions aimed at tax savings nor do they use aggressive practices of tax planning.
A consolidated system for managing tax relations ensures a systematic and uniform approach to applying tax legislation across LUKOIL Group.
The system of tax relation management and control in the LUKOIL Group is integrated into the overall strategic and corporate management, planning and control system and aims at minimizing tax risks and ensuring that tax obligations are fulfilled in full and in a timely manner. All major processes for monitoring and fulfilling tax obligations are automated and their efficiency is subject to regular reviews. LUKOIL's Tax Department is a unified competence center for tax matters.
Transparency is a basis for any tax activities of the LUKOIL Group.
LUKOIL Group has strengthened its reputation as honest taxpayer by moving its Russian entities to a new form of tax administration called "tax monitoring" where tax authorities can access data of the accounting systems and documents of the Group in real time.
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Tax Risk Management
A number of documents were adopted in the LUKOIL Group to manage risks, including tax risks: the Risk Management and Internal Control Policy of PJSC LUKOIL, Provision on Risk Management and Regulation on Tax Risk Management. These documents establish uniform requirements to preventing and identifying risks, including tax risks, assessing their probability and scope of consequence, mitigation measures and monitoring such risks by entities of the Group.
For the efficient management of tax risks the Company continuously monitors information resources to track planned amendments to the applicable legislation and participates in work groups to develop proposals on making amendments to the effective tax legislation of the Russian Federation and countries of its operations.
OECD Principles
Strengthening tax control over activities of international holdings through the Action Plan developed by OECD (BEPS Action Plan) is a major global trend in the area of tax administration. The BEPS Action Plan is designed to strengthen control over the profit shifting by international holdings, including increased control over transfer pricing.
To provide for the transparency and completeness of tax base formation for jurisdictions of presence of LUKOIL Group entities, every year the Company prepares Country Reports, Master File and National Documentation as required by BEPS Action 13. LUKOIL effectively eliminates transfer pricing risks by signing pricing agreements with tax authorities.
LUKOIL Group has all necessary conditions in place to comply with requirements of the transfer pricing legislation. Control mechanisms were implemented which allow for the comprehensive assessment of the use of market pricing principles in major supply chains and intragroup financing.
