Tax Policy

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Basic Policy

The Otsuka group operates around the world and recognizes that the appropriate payment of taxes in accordance with relevant laws and regulations in each country and region contributes to the local economy in those countries and regions. The group fulfills its tax obligations in accordance with the Otsuka Group Global Code of Business Ethics.

Approach

The Otsuka group complies with the Otsuka Group Global Code of Business Ethics, the group’s tax policy, country-specific laws, regulations and tax treaties of the countries in which they operate, as well as international taxation rules, and does not engage in transactions designed to evade the payment of taxes, but carries out the appropriate filing and payment of taxes in each country. We endeavor to appropriately disclose information and ensure a degree of transparency and trust when dealing with tax authorities in each country. The increased globalization of business makes tax oversight more complex, but by continuously updating information and preliminary consulting tax experts where necessary, we are appropriately responding to minimize tax risk.

Correspondence with Tax Authorities

The Otsuka group remains committed to building constructive relationships with tax authorities in the countries and regions in which it operates. As economies become more global and digital, the Organization for Economic Co-operation and Development (OECD) and other organizations have been reviewing the basic rules of international taxation. The shift toward a system in which even enterprises without permanent facilities in a location are liable for tax on income earned in that market means that the process of reporting to local tax authorities will become more complex and far-reaching. We will continue to improve the reliability of tax data and establish systems to provide it promptly.

Transfer Pricing Policy

The Otsuka group calculates transfer prices based on the OECD guidelines that were created for the prevention of double taxation and fair application of the transfer price tax system, as well as each country’s transfer price tax system, and makes efforts to ensure proper transactions between related parties. In addition, we are appropriately responding to the reporting of corporate information based on the common format published by the OECD. Also, when necessary, we make use of advance pricing agreements (APAs) to obtain ahead-oftime consensus with tax authorities.

Governance

We work to maintain and improve tax-related governance, recognizing that this contributes to the enhancement of corporate value. To this end, with the active involvement of the CFO, Otsuka Holdings' tax department is taking the lead, we are strengthening cooperation with other departments and operating companies as well as securing and training capable human resources, thereby maintaining an appropriate system that enhances the group’s tax compliance and reduces tax risks. Furthermore, we have established reporting obligations to the Board of Directors and the Audit & Supervisory Board regarding the abovementioned policies and processes, as well as their ongoing implementation and maintenance.

Tax Policy

As a multinational enterprise, the Otsuka group recognizes that the appropriate payment of taxes in adherence with applicable laws and regulations in each country and region contributes to local economies. Among increased calls for tax transparency worldwide, we are committed to making improvements in this regard. In accordance with the Otsuka Group Global Code of Business Ethics, the Otsuka group works to ensure appropriate payment of taxes under a principle of compliance that is shared by all employees, including those at departments outside the purview of the CFO.

Moreover, we strive to build constructive relationships with relevant tax authorities by maintaining and providing reliable data.

In accordance with its tax compliance policy, the Otsuka group will implement effective management, strengthen governance, build constructive and positive relationships with respective tax authorities and fulfill its tax obligations in all countries and regions.

June 26, 2020

Executive Director, CFO

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