Tax Governance

Based on the recognition that tax compliance is one of its indispensable social responsibilities, DENSO has established the DENSO Group Global Tax Policy. Guided by this policy, DENSO is actively promoting Groupwide efforts to enhance its tax compliance, including promoting educational initiatives for its employees and abiding by the rules of cross-border transactions.

Under the guidance of the chief financial officer (CFO) and member of the Board, who is appointed as the person responsible for overseeing tax governance, DENSO works to establish, maintain, and improve tax compliance structures. DENSO also addresses tax risks when they occur and engages in tax planning. In addition, DENSO’s accounting department handles Groupwide tax practices.

The CFO provides timely reports on important tax related matters at Board meetings and the Management Deliberation Meeting as necessary, and also regularly provides reports on tax governance to Audit & Supervisory Committee members. Through these reports, we are working to improve our tax governance structure.

1. Enhancement of tax compliance

DENSO Group performs the activities below under the recognition that tax compliance is one of indispensable social responsibilities.

(1) Training and Awareness activity for our associates
As stated in “Code of Conduct for DENSO Group Associates”, our associates must ensure proper accounting procedures and methods that are the basis of proper tax payment. The companies provide various opportunities such as seminars, e-learning, etc. in order for the associates to gain the necessary knowledge and skill level to meet appropriate tax compliance.

(2) Abidance by the rules of cross-border transactions
Cross-border transactions are to be conducted in accordance with legislative regulations as set forth by the OECD in Transfer Pricing guidelines and Controlled Foreign Corporation rules for multi-national companies. DENSO’s philosophy is to meet those guidelines and rules in applying proper arm's length prices in cross-border transactions with our related group companies as well as preventing from profit shifting to a low-tax country.

(3) Relationships with tax authorities
Tax payment is to be properly executed in each country where DENSO Group does business. The companies promptly provide information and implement countermeasures on tax issues addressed by the tax authorities.

2. Execution of proper and reasonable tax planning

DENSO has established and maintains Company rules and procedures for the handling of expenses, inventory, and other matters, and ensures that all employees are aware of said rules and procedures by sharing relevant information via the Company intranet and providing accounting compliance education along with other measures.The aim of such measures is to ensure that transactions that could lead to accounting irregularities, such as off-balance-sheet transactions, fictitious transactions or other unsound transactions, or transactions that could be mistaken as such, are not conducted, and that proper accounting procedures are performed in accordance with International Financial Reporting Standards and the laws and accounting standards of each country in which the Company operates.

Moreover, the Company creates and maintains accounting records, such as forms and account ledgers, that in reasonable detail accurately and fairly reflect all transactions and dispositions of assets.

Furthermore, the Company provides disclosures on corporation tax, and normal effective statutory tax rate and actual effective tax rate, as well as any discrepancies between the two, in its Annual Securities Report.

Going forward, we will ensure that we maintain a proper understanding of the various tax-related laws and rules in each country and region of operation, as well as the spirit of such laws and rules. We will also strive to improve our tax compliance and engage in highly transparent tax accounting in order to appropriately fulfill our tax obligations. Furthermore, we will contribute to the development of local communities and the enhancement of DENSO’s corporate value through tax planning and the appropriate use of tax incentives.