Tax Governance, Strategy & Principles

Responsibility

KPN’s Corporate Tax Department is the focal point on all tax related matters and is responsible for tax risk management. The Corporate Tax Department consists of highly qualified staff of tax professionals who are in constant dialogue with KPN´s senior management and KPN´s business. This ensures that KPN´s (senior) management is engaged and involved in all relevant tax matters. Within KPN we are obliged to act in accordance with our Code of Conduct ensuring our accountability and Governance. Our Tax principles are in line with our Code of Conduct. On a quarterly basis KPN’s Corporate Tax Department evaluates the adherence to the Tax Principles with the CFO as the responsible representative of the Board of Management. This evaluation is also overseen by Internal Audit and Operational Risk Management as part of the Tax Control Framework.

Compliance

We commit ourselves to behave responsibly at all times which, we believe, is integral to ensuring the long-term sustainability of our business. We act in accordance with applicable tax laws and regulations and are guided by relevant international standards, for example OECD (Organization for Economic Cooperation and Development) Guidelines. Where tax laws do not give clear guidance, prudence and transparency shall be the guiding principles. We aim for certainty on tax positions, but where tax law is unclear or subject to interpretation, we evaluate the likelihood and where appropriate seek an external opinion, to ensure that our position would be upheld. In doing so, we take due care of a sustainable relationship with relevant tax authorities. We prepare and file all tax returns required, providing complete, accurate and timely disclosures to all relevant tax authorities. KPN is committed to pay the right amount of tax at the right time.

Business rationale & transfer pricing

Tax is one of the elements we take into account in our commercial and economic activities. Tax follows the business and profits are allocated to the countries in which business value is created. We have clear procedures in relation to tax risk management and carry out risk assessments as part of any tax planning on significant transactions. We do not enter into aggressive and contrived tax planning structures. We therefore do not use secrecy jurisdictions or so-called ‘tax havens’ for tax avoidance, nor artificial tax structures that have no commercial or operational substance.* Our Corporate Tax Department is aligned with the business and is not a profit centre by itself. KPN may engage in tax planning initiatives and make use of incentives promoted by government authorities but due consideration needs to be given to KPN’s legitimate interests, reputation and corporate social responsibility. As we ensure that our transfer pricing policies comply with applicable internationally agreed and recognized principles as outlined in the OECD guidelines, we report income in the countries where the value is created applying the arm’s length principle.

Stakeholder engagement

We believe that transparency towards stakeholders (including tax authorities) is a cornerstone of good tax governance. We support global initiatives of the OECD to promote tax transparency and responsible tax management.

• Relationship with tax authorities: We seek to maintain an open, honest and constructive dialog with national and foreign tax authorities based on transparency, respect and trust. Consequently we disclose all relevant facts and circumstances. In The Netherlands this is embedded in Individual Monitoring Plan (“Individueel Toezichts Plan”) where we aim to enhance clarity and upfront certainty around tax. To this end, we engage proactively with the Dutch tax authorities. We meet on a regular basis to ensure that our business dealings are better understood and to exchange views and insights on various (tax) matters. This open, two-way communication enables us to minimize uncertain tax positions. KPN actively participates in representative associations, including public policy advocacy on tax, that seek to develop best practice around tax related disclosures.

• Other stakeholders: We fulfil our disclosure obligations. We regularly put forward understandable and timely public communication about our approach to tax, our tax position, and total tax payments on a country-by-country basis. We engage in a regular dialogue with stakeholders like NGO’s and interest groups and welcome constructive debate on taxation. We aim to show good corporate citizenship in the way we handle tax issues and communicate clearly about our tax governance, strategy and principles.