Issued 12 December 2014
Last updated 7 March 2018
The purpose of this policy is to outline principles for managing tax properly and safeguarding Norges Bank and the Government Pension Fund Global (‘the fund’) against risks associated with tax relating to the fund's investments. This includes on-going management of the tax position of the investments and of Norges Bank and its subsidiaries, and of administrative processes related to taxes.
The objective is to manage tax appropriately and prudently as part of our business, ensuring compliance with tax rules and ensuring that the correct amount of tax is paid. This policy applies to Norges Bank Investment Management (NBIM)'s management of all investments, including equity and fixed-income investments, unlisted real estate investments and the structures relevant to unlisted real estate investments.
NBIM is a large, long-term global investor which works to safeguard the fund’s value and build financial wealth for future generations. Tax affects the fund's return and can create risks and exposures for the fund and for Norges Bank. In addition to ensuring that we are compliant with all applicable tax rules, we will be guided by international tax standards published by or arising from the work of organisations such as the OECD insofar as these apply to the investments that we make. We will balance tax considerations prudently against investment and other business needs.
Equity and fixed-income investments are standardised products and often treated favourably by the tax rules in the countries where we invest. NBIM will ensure that tax properly due is paid, and tax not properly due is relieved, always in compliance with applicable local rules. This will be achieved through ongoing assessment of the tax position applying to our investment activities.
Tax characteristics are integral to the structure and performance of the fund’s unlisted real estate investments. We will structure the real estate holdings by balancing tax considerations and complexities against the need to protect the fund and Norges Bank from liability and to maximise the long-term return of the fund. We will take a prudent approach when structuring real estate investments.
Safeguarding our position
- We will have processes in place to assess the tax position and tax risks relating to countries and instruments or assets in which we invest, intend to invest, or carry out activities. We will monitor our transactions, income, gains and distributions to ensure that the correct taxes are paid.
- When dealing with tax authorities we will be open, transparent and consistent. We will seek to ensure that they have sufficient understanding of our assets, functions and activities to form a robust view of the relevant tax position.
- If tax matters relating to certain investments, structures, activities or operations may affect the fund’s other investments or Norges Bank, we will ensure that all relevant matters are properly considered in the best interests of the fund and Norges Bank.
Securities lending and tax
- Securities lending is used as a value-creating activity in the management of the fund. We will conduct these activities in a way that complies with local tax rules. We will not lend the benefit of our favourable tax characteristics to third parties. We will seek to avoid entering into securities lending transactions for the purpose of improving our tax position.
Structuring unlisted real estate investments
- Unlisted real estate investments are held through corporate holding structures to protect Norges Bank and other fund investments from liability. In creating holding structures, we will seek to prevent unnecessary tax costs that may reduce the return on the fund or limit our ability to compete commercially.
- Where possible and appropriate, we will use tried and tested structures and follow prudent market practice, or seek rulings in relation to uncertain tax positions, in the countries in and through which we invest.
- We will ensure that wholly-owned subsidiaries and our other holding structures comply with the management mandate and follow prudent tax management principles.
- We may invest in pre-existing structures with pre-determined tax characteristics. Additional risk assessments may be required in such cases. We will consider the legal and tax framework relating to those structures, taking account of wider objectives relating to tax and considering the need to maximize the long-term return of the fund. In such cases we may look to reorganise these structures so that they align more closely with our own tax policy and expectations.
Monitoring and review
- We will monitor the taxes that we pay and our compliance with tax regulations to safeguard the value of our investments and protect our reputation. We will balance tax considerations against other business needs and manage the interaction between these appropriately. These processes will be risk-based and identified concerns will be addressed and managed on an on-going basis.