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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 97 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 jurisdictions 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

Since 2021, a review of Shell-controlled and Shell-operated entities incorporated or present in low-tax jurisdictions has become an annual exercise undertaken by the country tax manager in each low-tax jurisdiction. The reviews are conducted against the Shell Responsible Tax Principles. The review forms part of our tax control framework and provides assurance that Group structures in low-tax jurisdictions continue to be there for commercial reasons. This exercise also identifies opportunities for liquidation and restructuring, for example in respect of new acquisitions or as the list of low-tax jurisdictions evolves.

Our reviews identify entities that are no longer active and can be liquidated as a matter of good corporate governance. We also identify entities that can be restructured and held or operated from another jurisdiction. In other cases, our reviews conclude that the entities could remain in low- or zero-tax jurisdictions because there is a commercial reason for being there.

As at the date of publication, we have liquidated 24 legal entities in low-tax jurisdictions since 2019, including in Bermuda and Saint Lucia, and we are in the process of liquidating 11 others.

New global minimum tax framework

The OECD's Pillar Two framework, which comes into effect from 2024, requires multinational companies to pay at least 15% tax on the profits they make in each jurisdiction where they operate. In response, governments of some low-tax jurisdictions are introducing minimum tax rates. We are participating in consultations with countries to support their implementation of the new tax rules.

As a result of Pillar Two, countries will be less able to use low tax rates to attract investment. Instead, tax competition between jurisdictions is likely to focus on other factors, such as the stability of the tax regime and attractiveness of the broader investment climate. When reviewing business opportunities in such jurisdictions, we will consider these factors in line with the Shell Responsible Tax Principles.

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 project in their proposal for country-by-country reporting. This is one of the four minimum reporting standards to which around 135 countries have committed, covering the tax residence jurisdictions of nearly all large multinational enterprises. 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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Tax haven
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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