Low-tax jurisdictions

Low-tax jurisdictions, so-called tax havens, are typically considered to mean countries with significantly lower effective tax rates compared with the average rates offered by other countries. In some cases, the corporate income tax rate is zero.

Governments determine the rate of corporate income tax and sometimes set low rates to attract investment from outside their borders. Most governments and international organisations, such as the , respect the sovereign right of governments to determine tax matters.

Shell has a in 99 countries and locations, with different tax regimes and varying corporate income tax rates. When we are present in low-tax jurisdictions, we are there for commercial reasons, such as crude oil trading and retail sites. These reasons can also include the presence of companies that hold investments or perform other services we need such as pensions, finance and insurance. In line with the Shell Responsible Tax Principles, we do not use these locations to avoid tax on activities that take place elsewhere.

Shell has a presence in many different countries and locations, which enables us to choose where to centralise the services that support our businesses. Before establishing any new company in a low-tax jurisdiction, we review the OECD’s substantial activities requirements. These ensure that companies operating in low-tax jurisdictions have real commercial substance and are not located there purely for advantageous tax reasons.

When we invest in a country, we consider factors which include accessibility to local or regional markets, the stability of the political, regulatory and social environment, local infrastructure and workforce. We also consider the overall costs of operation and the attractiveness and stability of a country’s fiscal regime. However, the investment must first meet our strategic, business or operational aims.

Reviewing entities in low-tax jurisdictions

In 2019, we launched a review of parts of our corporate structure against our Shell Responsible Tax Principles. The review focused on entities that are in low- or zero-tax jurisdictions. It considered the purpose of the entity and whether it should continue to be in that jurisdiction.

As a result of the review, we identified entities that are no longer active and that can be liquidated as a matter of good corporate governance. We also identified entities that can be restructured and held or operated from another jurisdiction. In other cases, our review concluded that the entities could remain in low- or zero-tax jurisdictions because there was a commercial reason for them being there.

For example, at the time of our review, Trinidad and Tobago was on the EU list of non-co-operative jurisdictions, which is sometimes referred to as the EU blacklist. However, we have substantial operational activity in the legal entities in the country, including exploration, production and liquefied natural gas (LNG) facilities. In 2019, our showed $3.4 million of corporate income tax paid and our Payments to Governments Report shows that Shell also paid around $177.1 million in , and fees. See Trinidad and Tobago to find out more about our operations.

The liquidation and restructuring of some entities in low-tax jurisdictions is now in progress.

Review of entities in low-tax jurisdictions

Review of entities in low-tax jurisdictions: Entities reviewed 96: 31 Identified for liquidation, 3 Identified for restructure, 59 Entities to be retained, 3 Sold/Activities in low-tax jurisdiction ceased (infographic)

Sometimes, we acquire entities which may be located in low- or zero-tax jurisdictions. In 2019, we reviewed recently acquired entities, such as in St Lucia for Upstream and LNG operations in the Caribbean. Following this review, we consolidated the operations and simplified the holding structure. As a result, we have identified four St Lucian entities for liquidation.

In 2019, we ended our intragroup lending activities in Switzerland, as disclosed in last year's Tax Contribution Report. In 2020, we also ceased our lending activities in Bermuda. These activities are now carried out in the UK and the Netherlands.

Our Responsible Tax Principles apply to all the countries where we operate. In this report, we share more detail about low-tax jurisdictions in the country pages. Further information on entities and ownership is available in the 2019 Annual Report and Accounts.

OECD stands for the Organisation for Economic Co-operation and Development which is an intergovernmental economic organisation with 36 member countries, founded in 1961 to stimulate economic progress and world trade.
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Permanent establishment
This describes the activities that take place in a country that requires the filing of a tax return and possibly the payment of taxes in that country. This is another name for a taxable presence.
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Tax haven
There are a different definitions of the term tax haven but typically this is considered to mean one country offering significantly lower tax rates or other tax features compared with the average rates or features offered by other countries.
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Country-by-country report
Country-by-country reporting (CbCR) was introduced for all large multinational enterprises (MNEs) as part of the OECD BEPS project. The report should disclose aggregate data on income, profit, taxes paid and economic activity among tax jurisdictions in which the MNE operates. The report is filed with the main tax authority (typically the tax authority in the country in which the MNE has its head office) which can share it with tax authorities in other countries.
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Production entitlement
This is the host government’s share of production. It includes the government’s share as a sovereign entity or through its participation as an equity or interest holder in projects within its home country.
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Royalties are generally payment due for the use of an asset. Mineral royalties are payments to governments or other owners for the rights to extract oil and gas resources, typically at a set percentage of revenue less any deductions that may be taken. See also Trademark royalties.
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Holding company
The principal purpose of this type of company is to hold and manage investments in other companies or joint ventures. Holding companies differ from operating companies, for example they will need less staff but they still have commercial value as a way to manage and administer all the different investments within a group.
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