Our tax policy is to pay the right amount of tax at the right time in each of the countries in which we operate. Tom Stoddard Aviva Group CFO

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1 Aviva tax strategy

2 We are a responsible tax payer and make a significant contribution to the UK s economy and society through our position as one of the UK s largest companies. We conduct our business dealings in accordance with both the letter and spirit of all tax laws, disclosure obligations and prevailing practice in the markets in which we operate. Tom Stoddard Aviva Group CFO Our tax policy is to pay the right amount of tax at the right time in each of the countries in which we operate. 2

3 What is our tax strategy? Our core values Care more Kill complexity Consistent with our core value to Care More, this means: paying the right amount of tax, in the right place and at the right time and; only undertaking tax planning in the context of wider business activities, where there is a real commercial and economic basis that does not lead to an abusive tax result. This approach to tax compliance is consistent with the Group s appetite to manage its operational risk to as low a level as is commercially sensible, taking account of both the financial impact and the value placed by the Group on maintaining a reputation for upholding the highest standards of corporate ethics. We act with honesty and integrity, engaging with HMRC and other relevant tax authorities on a transparent and cooperative basis. With a low appetite for litigation, we prefer to seek clarity through timely discussion and prompt disclosure of all relevant information, to enable HMRC to form an accurate assessment of the tax implications of our activities. We provide all relevant information to enable the tax authorities to assess the current, future and past tax risks. We engage proactively in external developments on tax policy and engage with national governments, the EU, OECD and others where appropriate. This Tax Strategy is aligned with the Aviva Business Ethics code. It is owned by the Group Chief Financial Officer and is approved and overseen by the Board. This document has been prepared and published in accordance with paragraph 16 (2), Schedule 19, Finance Act 2016, on behalf of Aviva plc and all UK tax resident companies in the Aviva plc Group. Never rest Create legacy 3

4 How have we implemented our tax strategy? We re here to Defy Uncertainty by helping our 33 million customers protect what s important to them and help them save for the future. In 2016 we paid out 34.4bn in benefits and claims. Our value of Care More extends to our customers, employees and the wider community. 58% of our global businesses are either at or above the upper quartile for customer advocacy Our tax policy is to pay the right amount of tax at the right time in each of the countries in which we operate. We firmly believe in dealing transparently with the tax authorities and take a responsible approach in managing our tax affairs. We require all our businesses to comply with the tax laws in their markets and not enter into schemes or structures which result in an abusive tax result. When we undertake tax planning we only do so in the context of wider business activity with a real and commercial basis that does not lead to an abusive tax result. 74% is our employee engagement level, which is above average for financial services 1,600 community projects supported in

5 What taxes do we pay? 0.01bn Environmental and other taxes 0.3bn VAT and sales taxes 2016 How much tax do we pay and collect? 1.3bn 0.7bn Corporation tax We contribute taxes to governments around the world in two ways. Firstly, our tax borne is the tax paid by Aviva Group, and this reflects a cost to our shareholders. Secondly, our tax collected is the tax we collect and pay to tax authorities on behalf of customers, suppliers and employees. Total tax borne 0.2bn Employer payroll taxes 0.02bn Business rates Our tax contribution is substantial and in 2016 our global total tax contribution was 3.8bn, including 1.3bn tax borne and 2.5bn tax collected. In the UK in 2016 our Total Tax Contribution was 2.2bn, of which 0.6bn was tax borne including VAT and Employers NI and 1.6bn was collected from others. 1.1bn Tax on customer pensions, income and investments bn 0.4bn Employee payroll taxes Total tax collected 1.0bn VAT sales and premium taxes 5

6 How does the corporation tax paid differ from the tax charge in the accounts? Each year we make cash payments to tax authorities in relation to corporation tax. This amount paid is generally different to the tax charge shown in the accounts. This difference is mainly because of the timing of when payments are made compared to when they are incurred. For example, in the UK 50% of the tax charge for 2016 is payable to HMRC in 2016 and 50% is payable in the first 4 months of This means that each year we will make payments in relation to prior years, and also some of our payments will be deferred to future years. 6

7 Where do we pay tax? Create Legacy We pay tax in countries around the world, reflecting the international nature of our operations. We have a strategy of Not Everywhere and focus our resources where we can be most competitive. We focus on a select number of markets where we have scale and profitability or a distinct competitive advantage m 205m Our major businesses are situated in the UK, France, Canada, Spain, Italy, Poland, Ireland and Singapore. 99% of revenues, 96% of our profit and 100% of our tax paid in 2016 was in these top eight jurisdictions m The chart opposite sets out the corporation tax paid on profits in the countries in which we operated in 2016, focusing on our major businesses UK France Italy 37m 36m Canada Spain 20m 15m Poland Ireland 4m Singapore 7

8 We pay tax on the economic profits earned in each country in which we carry out business. The amount of tax we pay and where we pay tax is therefore a consequence of where we create economic value from our commercial activities. Aviva currently has captive reinsurance companies in Bermuda and Barbados. These were put in place to provide capital efficient pooling of risk in traditional reinsurance locations with a supportive regulatory regime and significant local experience. A strategic decision has been taken to transfer a large proportion of our internal reinsurance business to our UK based company, Aviva International Insurance Limited. 8

9 In addition, there are various fund vehicles managed by Aviva Investors which are resident in low tax jurisdictions Luxembourg, Guernsey, Jersey and Isle of Man. One of the key considerations when setting up a fund is to ensure that the fund is as efficient as possible for investors. As is common practice in the investment management industry, the investment fund is structured to mitigate tax arising within the structure and ensure that income and gains are predominantly taxed in the hands of the investor. One of the key considerations when setting up a fund is to ensure that the fund is as efficient as possible for investors. 9

10 How do we ensure we are complying with our Tax Strategy? Our approach to risk management Our risk management approach pays regard to our reputation and the impact we have on our suppliers, customers, wider community and the environment. The Tax Strategy is supported by the Tax Business Standard, owned by the Group s Chief Taxation Officer. The Standard sets out specific controls for managing and reporting on tax risks across Aviva Group. The controls cover a wide range of tax risks including meeting regulatory requirements, processing corporate transactions and dealing with our customers, suppliers and employees. We require the CEOs of all our businesses to manage tax risks in their jurisdiction, considering both proximate and long-term risks. Our businesses are required to report tax risks to Group Tax and the Risk team on a timely basis. The Tax team maintains a risk register detailing both internal and external tax risks, which is discussed at Tax committees. The Chief Tax Officer regularly reports the tax position to the Group Audit Committee (a subset of the Aviva PLC Board). 10

11 We ensure that business decisions are made at an appropriate level and on the basis of a documented assessment of the tax impact and risks involved. We apply diligent professional judgement, and work closely with HMRC, in reaching reasoned conclusions in compliance with tax law, accounting standards and other relevant obligations. External advice will be sought where the risk, complexity and size of the decision requires an opinion from a third party. We also take into account the capability and capacity of our internal teams to assess the tax impact of a business decision. We ensure that all tax returns and correspondence are prepared and reviewed by qualified and trained staff, acting under appropriate delegated authorities We ensure that all tax returns and correspondence are prepared and reviewed by qualified and trained staff, acting under appropriate delegated authorities. Where the Group outsources activities the outsourcing partner must be able to meet the relevant tax compliance responsibilities. The management of Tax risks is overseen by the Risk and Audit functions. 11

12 Our strategy True customer composite Digital first Not Everywhere Meeting all customer needs across life, general, accident & health insurance and asset management Emphasising customer experience driven by digital online and mobile Focusing only in markets and segments where we can win 12