Taxation
Providing NXP taxation principles, approach, governance and engagements applied across our geographic operational footprint.
Taxation Standards
- We comply with all applicable tax laws
- We align our profit allocation with international tax principles
- We use tax incentives to directly support innovation and R&D
- We have zero tolerance for tax evasion
- We have no active presence in countries on the EU's list of non-cooperative jurisdictions
- We are open and transparent with tax authorities
Overview
Since our founding as a company, NXP has applied a tax strategy that is sustainable, transparent and fully aligned with well-known and widely recognized international tax principles. The approach described below encompasses all taxes, and it applies worldwide to all NXP group members.
NXP is a responsible and accountable taxpayer. Transparency helps us offer insights for a well-informed public debate, invites public examination and helps us contribute to the overall welfare of society.
To further enhance sustainability, we disclose below how we manage our tax obligations and summarize NXP's quantitative tax effects in NXP's financial disclosures. Moreover, we will soon disclose country-specific tax information.
Approach to Tax
NXP's tax strategy – that is, the way we approach, manage and assess the risk of taxation – is grounded in the corporate objective to act as a socially responsible company. The NXP Code of Conduct serves as an ethical framework for taxes and is effectively embedded within the tax strategy and across the tax organization. Hence, NXP's tax strategy also governs NXP's relationships with employees, customers and contractors.
NXP aims to support stable, transparent and predictable tax systems that incentivize long-term investments and economic growth. NXP is committed to complying with the letter, the intent and the spirit of the applicable tax laws of the jurisdictions where we operate.
NXP's tax structure is based on global standards and frameworks supported by the Organisation for Economic Co-operation and Development (OECD). We believe that operating within this framework creates a constant contribution to the advancement of the UN Sustainable Development Goals (SDGs). After a business acquisition, NXP's Tax Team ensures that the acquired structure will fully adhere to NXP's Transfer Pricing Tax Policy strategy and OECD global standards, further reinforcing our commitment to these principles.
NXP invests in R&D, manufacturing and go-to-market activities using a cross-functional model, leveraged by multiple organizations globally. The resulting supply chain and product development form the foundation of NXP's structure for transfer pricing.
Regarding our product-development framework, NXP leverages the available tax incentives and tax regulations in the various jurisdictions where we operate. The most important tax incentives NXP is eligible for are the ones that drive and promote innovation and R&D activities. For example, as a Dutch multinational focused on R&D, NXP qualifies for the innovation box regime, provided by Dutch tax law, which reduces the nominal tax rate for qualified income associated with R&D from 25.8% to 9%. The effective Dutch tax rate for NXP is above 15%.
Approach to Transfer Pricing
NXP operates globally across numerous tax jurisdictions and regularly engages in intragroup cross-border transactions. NXP's transfer pricing policy is grounded in the "arm's length" principle, ensuring that all affiliated entities are fairly and appropriately remunerated. Compensation is determined by considering the specific functions each entity performs, the risks it assumes, manages, and controls, and the assets it employs in conducting its activities, reflecting the economic contributions and value creation of each party within the group.
NXP annually reviews and updates its transfer pricing policies to maintain alignment with the value creation within its commercial activities. To ensure compliance with the "arm's-length" standard, NXP benchmarks and compares intragroup transfer prices to confirm they reflect market rates that would apply if the parties were unrelated.
NXP is fully committed to the OECD Base Erosion and Profit Shifting (BEPS) Action Plan and actively monitors evolving trends and standards in the international tax landscape, with regular internal tax department meetings to support timely and informed decision-making and action-taking.
NXP does not have active presence in black-listed jurisdictions¹ as defined by the EU and does not use artificial structures to achieve tax advantages or minimize tax liabilities. In this sense, all NXP entities are resident for tax purposes in the jurisdictions where they perform their business and generate profits.
Tax Governance
NXP has a robust tax governance, control and risk-management system consistent with industry-wide, best-in-class frameworks.
The NXP tax department is a centralized organization that manages both regional and functional requirements. It is led by a Senior Vice President, reporting directly to the Chief Financial Officer. The Chief Financial Officer is responsible for updating the Audit Committee of the Board of Directors on a regular basis, with support from NXP's tax-department leadership. Every year, the Audit Committee of the Board of Directors approves the NXP tax strategy. The NXP Tax Team ensures that the tax strategy and the goals derived from it are regularly updated and aligned with the overall NXP Group business strategy and goals. Hence, the Tax Team as a whole is responsible for implementing the tax strategy, with the Head of Taxation ultimately accountable for it.
To ensure NXP's tax strategy is effectively embedded in the organization, the NXP tax department actively participates in initiatives such as trainings on the interlink between taxes, business and sustainable development, and interacts with external tax advisors seeking to develop best practices around tax. Moreover, NXP regularly engages with external tax advisors and local tax authorities to provide assurances that our tax obligations are properly, effectively, and correctly handled and disclosed in the annual and quarterly reports. Furthermore, fact-based tax accounting and policy advice are available in a timely manner throughout NXP. Every quarter-end, the regional tax managers, the Head of Transfer Pricing, the Head of Tax Accounting, the Head of Indirect Tax and Trade Compliance and the Head of Group Taxation meet to discuss and evaluate compliance with the framework for tax governance and control.
NXP applies a consistent and reliable assurance process for disclosures on tax. The NXP tax department prepares a draft tax disclosure, which is first reviewed by NXP's sustainability team. Afterwards, an editor enhances clarity and maintains common standards throughout NXP's Corporate Sustainability Report. Once the draft disclosure is final, before its publication, it is reviewed and approved by NXP's Management Team and Board of Directors.
Risk Assessment and Mitigation
NXP has a low appetite for tax risk. Nevertheless, NXP operates on a global basis and is potentially exposed to numerous risks, including those related to taxation. To ensure the identification and resolution of tax issues in a timely fashion, NXP's global framework operates through regional and functional dimensions.
The Tax Team continuously monitors the processes for tax accounting, tax compliance and reporting to identify and manage potential risks. The Tax Team documents every stage of the process. When the Team identifies potential risks, it applies critical and professional reasoning on an issue-by-issue basis to balance the acceptable risk limits as they relate to taxes. In addition, to support transparent financial reporting, NXP follows Generally Accepted Accounting Principles (GAAP) and has implemented a robust, effective and efficient tax-accounting control framework that assures compliance with the US 2002 Sarbanes-Oxley Act.
SpeakUp
Potential violations of NXP's Tax Policy can be confidentially reported using various reporting channels, such as management, an ethics liaison, the NXP Ethics Committee or our SpeakUp line, a system hosted by an independent third party that facilitates anonymous reporting via phone or web. A strict policy of non-retaliation is in force to protect any team member who reports potential violations.
Engaging with Tax Authorities and Stakeholders
NXP is committed to open and transparent relationships with tax authorities, grounded in ethical integrity, collaboration and mutual respect. For all requests of information or audits, we provide the required documentation in a timely manner. To foster and maintain long-term relationships with tax authorities, NXP seeks to participate in cooperative compliance programs available for large taxpayers. NXP currently participates in such a program in the Netherlands and is considering participating in similar programs elsewhere, such as in Singapore.
Furthermore, NXP seeks to engage constructively in national and international dialogue with governments, tax authorities, international organizations, business groups and civil society to support the development of effective tax systems, legislation and administration. As such, when any of these stakeholders ask for feedback or insights, NXP shares its view as a multinational corporation and member of the semiconductor industry. NXP's active participation in diverse consultations and surveys promoted by governments, tax authorities and investments and development boards of, for instance, the Netherlands, Singapore and Malaysia, regarding the implementation of the Global Minimum Taxation, is a clear example of NXP's approach to public-policy advocacy on tax matters.
As a member of the European Business Tax Forum (EBTF), NXP also participates in the Total Tax Contribution , a study of the largest companies in Europe that aims to raise awareness and aid in understanding the contribution of large businesses in the public economy.
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