Responsible Tax

At Novo Holdings, we see it as an integral part of being a responsible long-term investor to conduct our tax affairs in a robust and transparent manner. Our diligence towards tax affairs is stated in our Tax Policy, which governs all taxes paid by Novo Holdings and applies to both direct and indirect investments.

The Novo Holdings Tax Policy

The Tax Policy was launched in 2020. We regularly revise and improve the Tax Policy and our conduct to ensure compliance with the latest legislation and standards.

Our ambition is to fulfil our stakeholders’ expectations towards Novo Holdings as a responsible investor and to be aligned with the tax policy approach adopted by the largest Danish pension funds.

The overall purpose of our Tax Policy is to disclose how Novo Holdings views and manages taxation and how we consider tax risks from an overall perspective. Further, the Tax Policy discloses our requirements and expectations towards external managers and co-investors.

Download the Novo Holdings Tax Policy
Main objectives of the Novo Holdings Tax Policy

The purpose of the Tax Policy is to maintain a responsible and robust tax approach with the following main objectives:

1. Mitigating tax risks by taking tax decisions on a transparent and informed basis

2. Ensuring best effort to be in compliance with fiscal laws and regulations

3. Striving to avoid any controversy with tax authorities in the jurisdictions where business is carried out and where investments are made and where controversy is inevitable to ensure collaborative interaction with tax authorities

4. Only engaging in investment structures that are driven by commercial considerations and supported by economic substance which is not artificial (position on tax planning).

5. Being transparent about our approach to tax

6. Ensuring that investments are made in a responsible manner, as reflected in explicit expectations for business partners and portfolio companies

Signatory to the Danish Tax Code of Conduct

In 2020 Novo Holdings joined the Danish Tax Code of Conduct, initially adopted by several of the major Danish pension funds and subsequently joined by other large institutional investors. It covers six areas and outlines the expectations for external asset managers and investors.

The six areas cover:

1. Investors’ expectations towards external managers

2. Tax planning, defining which tax structures and transactions can and cannot be accepted

3. Country restrictions

4. Investments in developing countries

5. Transparency and dialogue

6. Future developments

By signing the Tax Code of Conduct, we are joining forces with other large investors to establish – and adhere to – tax practices that are in accordance with the OECD tax initiatives. We find that taking an active stand against aggressive tax planning and pledging to increase tax transparency, which are among the key points of the Tax Code of Conduct, are essential steps towards achieving the United Nations Sustainable Development Goals.

Tax process for investments

Novo Holdings takes an active approach to handling potential tax risks by identifying tax risks when entering new investments. New private investments are carefully assessed according to our processes and principles to make informed tax decisions in which tax risks are assessed and mitigated and to ensure that Novo Holdings does not engage in aggressive tax structures.

Novo Holdings will ensure that a tax technical assessment is made and, if deemed appropriate by the Novo Holdings Tax Team, obtain an external opinion for all major transactions for which obtaining a firm tax position is necessary. For example, this could be relevant in situations in which there is uncertainty about how to interpret or apply the tax legislation or if the investment is particularly significant financially. We will only adopt a tax position if we are able to explain it and prepared to defend it.

Furthermore, Novo Holdings is monitoring changes in tax rules and tax practices that may influence Novo Holdings’ tax position in relation to our investments. This implies that Novo Holdings will monitor the tax risk in major jurisdictions where investments are conducted.

1. Due diligence

Identify and quantify the tax-related risks of the investment target.

2. Structuring

Determine the best investment structure for Novo Holdings and ensure compliance with our tax planning principles

3. Negotiation

Ensure that our requirements on tax are reflected in the contractual basis for the investment.

4. Implementation

Ensure that the investment structure is implemented correctly and registred in our asset register.

5. Asset management

Handling of applicable tax filings or reporting and monitoring of tax risks and alignment of our tax policy