Tax compliance
Shell invests significant time and resources in building processes to support accurate and timely compliance with tax legislation. We are committed to complying with the tax legislation of the many countries where we operate and seek to establish constructive relationships with tax authorities.
In 2022, Shell filed around 5,300 direct tax returns and about 37,300 indirect tax returns. We filed these on time in almost 100% of cases. We also processed more than 25,600 separate tax payments. Occasionally, tax returns are submitted late. When this is the case, we carefully monitor the reasons, learn from them and pay any applicable late-filing fees. If we identify errors in our filings, we seek to address these with the relevant tax authorities.
Around 650 trained staff prepare, file and process our tax returns and payments. They are based in our business service centres in Poland, India, Malaysia and the Philippines. We also rely on a global team of around 280 tax experts who advise the business according to the Shell Responsible Tax Principles and our tax control framework. Where appropriate, we run training sessions for non-tax staff who need to be aware of tax compliance requirements.
Read more in Responsible Tax Principles.
Assurance and controls
Our Tax function supports the business in delivering on priorities and understanding tax risks. We seek to submit accurate tax accounting data and tax returns, in compliance with the letter and spirit of the applicable laws, wherever we have a taxable presence.
Our tax control framework, policies and guidelines set out the standards, risk management, controls and assurance processes that establish boundaries for our tax activities. The framework helps us to identify tax risks and sets out practical guidance for our staff, including the procedures for considering tax risks.
All ventures that we operate must conduct their activities in line with our business principles. The tax control framework is part of the Shell Control Framework [A], which applies to every Shell entity, including its employees and contract staff, and to Shell-operated ventures. We monitor the adequacy of our system of risk management and internal control throughout the year. External auditors regularly review our tax controls as part of the audit of our financial results.
Tax authorities in several countries, including the UK and the Netherlands, have granted Shell entities Authorised Economic Operator (AEO) status for customs duties. AEO is an internationally recognised status which indicates that Shell operates secure supply chains and has a strong compliance framework when it comes to customs processes and controls. One of the benefits of having AEO status is reduced reliance on physical and document-based customs controls.
We do not condone, encourage or support tax evasion. Compliance is embedded in the Shell General Business Principles and the Shell Code of Conduct. Employees, contract staff and third parties with whom Shell has a business relationship may raise ethical and compliance concerns, anonymously if preferred, through the Shell Global Helpline.
[A] As of July 1, 2023, the Shell Control Framework has been replaced by the Shell Performance Framework.
Dealing with uncertainty
Our aim is to take sustainable tax positions in support of our business investments, which may be of a long-term nature. When we apply tax legislation, we do so with the reasonable expectation that our interpretation will be upheld in court. Sometimes, the law or how to apply it is unclear to taxpayers.
The countries in which we operate have differing degrees of political, legal and fiscal stability. This exposes us to a wide range of political developments that could result in changes to contractual terms, laws and regulations. We continually monitor geopolitical developments and societal issues relevant to our interests. In situations where the tax law and how to apply it are unclear, we will first seek to find clarity by talking to the tax authority and sharing our understanding of the application of the law.
There are a number of ways in which a lack of clarity can be resolved. One such solution is a co-operative compliance arrangement, where businesses and tax authorities proactively discuss how to resolve uncertainty before the tax filing occurs. Tax authorities in different countries can hold conflicting views about how the taxation of multinational enterprises should be interpreted or applied. When this lack of clarity occurs within a tax treaty or agreement between countries, we may use a mutual agreement procedure where the authorities aim to resolve the issue between themselves.
If we are still unable to reach an agreement with an authority on any matter of tax, we may have to test the legal principle of the tax law concerned through the judicial system. However, we take this approach only when other options have not provided a resolution. If uncertainty remains on tax law and how to apply it, investment decision-making may be impacted as different scenarios would need to be factored into the investment appraisal process. This could potentially make it more difficult to make a positive investment decision.
Tax liabilities are recognised when it is likely that there will be a future payment to a taxing authority. In such cases, provision is made for the amount that is expected to be paid. These provisions are measured at the most likely amount or the expected value, whichever method is more appropriate.
Generally, uncertain tax treatments are assessed on an individual basis unless they are expected to be settled collectively. Provisions for taxes on uncertain income can be examined by tax authorities. A change in an estimate would be recognised in the income for the period in which the change occurs.
Compliance with transparency initiatives
We continually review our tax disclosures for compliance, taking into account transparency initiatives. We also provide constructive input to industry groups and international organisations, such as the EITI and The B Team Responsible Tax Working Group.
We seek to comply with transparency standards including the Global Reporting Initiative (GRI). We agreed to report on a range of environmental, social and governance (ESG) performance factors at the 2021 World Economic Forum. The GRI has set out sustainability reporting standards that aim to help companies report more transparently on their ESG performance.
In 2021, the GRI introduced the GRI 207 standard which encourages companies to publicly and comprehensively disclose country-by-country corporate income tax payments. GRI 207 provides best practice reporting guidance. We have publicly disclosed country-by-country income tax payments, according to OECD guidelines, since we published our Tax Contribution Report for 2018.
Shell has worked with the largest employers' organisation in the Netherlands, the VNO-NCW, on an initiative to improve tax governance and transparency for companies listed in that country.
In May 2022, the VNO-NCW published the Tax Governance Code (TGC), which Shell helped initiate and develop. Given the scale of our activities in the Netherlands, we have voluntarily signed up to the TGC.
The code is based on existing transparency initiatives such as The B Team Responsible Tax Principles, the GRI and the World Economic Forum's Stakeholder Capitalism Metrics.
Our tax activities, therefore, already largely comply with the TGC. We will continue to review and improve our tax disclosures so that they are meaningful to our stakeholders.
Tax Governance Code |
In this report |
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A. Approach to tax: Tax strategy and tax principles |
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B. Accountability and tax governance |
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C. Tax compliance |
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D. Business structure |
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E. Relationships with tax authorities and other external stakeholders |
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F. Tax transparency and reporting |
Our tax data, Total tax contribution, Tax incentives, Advocacy, Annual Report list of subsidiaries (shell.com/annual-report) |
