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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 have a sovereign right to determine tax matters in their countries and sometimes set low corporate income tax rates to attract investment from outside their borders.

Shell has a taxable presence 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.

When we invest in a country, we consider factors which include access 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

We conducted a review in 2019 and 2020 of Shell-controlled and Shell-operated entities incorporated or present in low-tax jurisdictions against our Shell Responsible Tax Principles. The review considered the purpose of the entity and whether it should continue to be in that jurisdiction.

We identified entities that are no longer active and can be liquidated as a matter of good corporate governance.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 being there.

Since 2019, we have liquidated 18 legal entities in low-tax jurisdictions, including in Bermuda and Saint Lucia, and we are in the process of liquidating 33 others.

In 2021, a review of our presence in low-tax jurisdictions became an annual exercise undertaken by the country tax manager in each low-tax jurisdiction. This now forms part of our tax control framework and provides ongoing assurance that Group structures in low-tax jurisdictions continue to be there for commercial reasons. The new assurance control process will also identify potential liquidations and restructuring.

Read more about our presence in low-tax jurisdictions in Our tax data.

The OECD two-pillar approach

In recent years, international organisations, such as the OECD, and many countries have discussed whether a country’s low-tax policy may have a negative impact on other countries. They have also debated various ways of addressing this. Most recently and steered by the G20, the OECD has been developing proposals for a coordinated two-pillar response. Read more in The changing tax landscape.

Commercial reasons or commercial considerations
Commercial reasons or commercial considerations refer to activities undertaken with a view to making a profit. An entity’s presence in a country should be the result of commercial activities and it should have the appropriate substance to perform those activities. The management and directorships of the operating company should be in the country of operation.
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Corporate income tax
This is a direct tax imposed on companies’ profits. It is sometimes levied at a national level but can also be levied on a state or local basis.
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Throughout this report, “country” is used as the primary descriptor for a geographical area because that is the word used by the OECD/G20 Base Erosion and Profit Shifting (BEPS) project in their proposal for country-by-country reporting (CbCR). This is one of the four minimum reporting standards to which over 100 countries have committed, covering the tax residence jurisdictions of nearly all large multinational enterprises (MNEs). In this report “country” may also refer to locations, jurisdictions or territories which have their own tax regimes or discrete rules.
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Low-tax or zero-tax rate jurisdiction
See Tax Haven.
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OECD stands for the Organisation for Economic Co-operation and Development which is an intergovernmental economic organisation with 38 member countries, founded in 1961 to stimulate economic progress and world trade.
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Tax haven
There are 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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Taxable presence
See Permanent establishment.
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