Tax Performance

Hass Avocado American Persea.

Tax performance

During 2016, Grupo Argos, through the Legal Tax Management, was in charge of monitoring and controlling the Corporate Tax Policy, which was released during the year 2015 and which disseminated a series of guidelines and standards geared towards business decisions made by both the holding company, as well as its affiliates and subsidiaries, and making sure that these are aligned with corporate strategy. The foregoing implies that these must occur in a framework of transparency, always pursuing best practices and delivering clear and complete information to stakeholders in a timely manner.

Pillars of the Corporate Tax Policy

For more details on the Corporate Tax Policy of Grupo Argos go to: Tax Policy Grupo Argos

With the purpose of setting specific control mechanisms that allow effective compliance of the policy, a series of activities were carried out, which are as follows:

  • Creation of a regulatory framework of legal-tax best practices derived from the employment relationship. This work was intended to identify and disseminate the appropriate treatment of withholding taxes for labor, salary and non-salaried payments, so as to determine the correct contributions to the Social Security System of the salary and non-salary payments.
  • Comprehensive support to the structural tax reform project. Within the corporate tax functions defined in the Tax Policy of Grupo Argos, support and relationship with the different authorities and associations are defined. As part of the foregoing, Grupo Argos actively participated in the process of structural tax reform, seeking to provide the vision of entrepreneurship and to supporting technical discussions around the process of building regulations. As a result of this management, it was possible to effectively mitigate the adverse impacts of a regulatory change, a risk that was identified and characterized as strategic to the organization. (For details on the organization’s strategic risks, please go to the Risk Management chapter).
  • Building a matrix to calculate deferred tax in the businesses and quantify the impact of deferred tax at Cementos Argos. This tool is intended to know the effect of the recognition of deferred tax on financial statements (both results and equity). It also identifies the items where the differences affecting the deferred tax are concentrated. This matrix is useful for identifying the effects that some operations will generate in the holding company, as well as to mitigate any adverse effects that may be found.
  • Development of a matrix of legal-tax controls for Odinsa S.A to identify contingencies that may affect the value of the business. An analysis of the main contingencies found and susceptible to modify values allocated to the underlying assets in the acquisition of Odinsa S.A. was conducted. The analysis included, among other things, the value of contingencies, the possibility of occurrence and the adequacy in the information that would allow recommending encumbrances of value. During the analysis of this information, a legal matrix was developed, which allowed for the timely identification and analysis of the company’s litigious status.

As a way of guaranteeing compliance with the policy, the Company has the active and permanent support of the Corporate Controller, who is in charge of the Audit and Internal Control departments.

The activities described during the year are part of the general goals set during 2015 for effective compliance with the Grupo Argos Corporate Tax Policy. These activities are not only aimed at exercising specific controls to certain operations, but also enable effective monitoring of certain contingencies and transactions that are relevant for Grupo Argos.

The guidelines and standards relating to the flow of information that will have to be delivered by affiliates and subsidiaries in order to meet the requirements of the structural tax reform must be established. The identification and control of the Rules of Foreign Controlled Entities, the country report, and the master transfer pricing report, among others, are highlighted.

For subsequent years, and taking into account the standards incorporated in the structural tax reform – which are based on practices established in international taxation – Grupo Argos faces a series of major challenges that will entail an update of its Corporate Tax Policy.