INREV Members are encouraged to formalise an internal tax governance and tax risk management framework.
As such, INREV Members are expected to indicate that tax and tax policy are well embedded within their organisations and that these reflect the INREV Members’ stances or endorsements of tax conduct in general.
Tax governance and risk management responsibilities, which are recommended to operate with an appropriate level of human resources as per each Member Organization – could have the following objectives:
- Assurance of an independent assessment of tax matters within the organisation’s main decision making functions;
- Assessment and compliance with tax obligations arising from investments;
- Prevention and mitigation/elimination of tax related risks arising from the investments (either financial, reputational or other risks);
- Assurance that the tax risk profile of the organisation is consistent across investments and in line with Investor expectations;
- Definition of processes to monitor the enforcement of same principles internally and externally (towards third party service providers);
- Management and orientation of INREV Members interaction with public authorities as regards specific tax related matters;
- Management of hiring policies for third party service providers to assist the undertaking of said responsibilities; and
- Handling conflicts of interest within the vehicle.
Further guidance on this matter can be found in OECD Guidelines.
INREV Members are encouraged to regularly monitor and test the operational capacity of the tax governance and risk management responsibilities to assess the extent to which it is representative of their endorsed tax conduct and the assumed positions on tax risk.
Individuals in charge of the tax governance and risk management responsibilities should possess a senior level of experience when dealing with pan European investment tax related items (notably European, international and other relevant tax law).
INREV Members are recommended to ensure that individuals allocated to such responsibilities regularly receive on the job training as means to appropriately manage and update tax positions, as well as to meet regulatory requirements, where needed. Third party service providers could assist in the undertaking of such framework. A written protocol on how to handle conflicts of interest within the investment vehicle may be implemented.
The supervision of these responsibilities should be allocated to senior leadership and/or the Board of Managers / Directors who should prompt regular briefings on material tax issues, legislative changes and significant disputes.
Significant tax risks should also be subject to validation by the person in charge of tax governance and risk management.
The tax governance and risk management responsibility is also recommended to support and contribute to the implementation of international and EU standards on AML-CFT.
INREV Members are recommended to determine their approach towards tax and pre-define an internal tax and transfer pricing policy in light of responsible business investment strategy.
Within this approach to tax and transfer pricing, INREV Members are encouraged to:
- monitor the tax impact on any investment envisaged in a jurisdiction;
- take into account capital efficiency and regulation while structuring an investment;
- make a holistic assessment taking into account the range of possible tax outcomes; and
- follow OECD recommendations.
For the content of the tax policy, guidance can be taken from the UN investors' recommendations on corporate income tax disclosure and the GRI 207: Tax 2019 reporting standard.