Lufthansa Group
UK Tax Strategy 1)

1. Introduction

The following information is provided in compliance with the requirements of Finance Act 2016 Schedule 19, paragraph 16(2). 

At Lufthansa Group, we attach great importance to responsible and sustainable company management. In particular, Lufthansa Group strives towards exemplary company management in the sense of effective Corporate Governance, as well as sustainable risk management. This helps Lufthansa Group to determine long-term strategic decisions in an appropriate way. 

Corporate Responsibility is also a pre-eminent concern of Lufthansa Group. Furthermore, Lufthansa Group’s Code of Conduct binds our management and staff to act in an ethically and legally impeccable manner. 

In terms of our attitude towards taxation, Lufthansa Group is a fair and reliable partner to its clients, its employees, its shareholders and all other external regulatory compliance parties (incl. HM Revenue & Customs (“HMRC”)). We are committed to acting in a prudent and responsible manner. We are an open, transparent and dependable taxpayer.

2. Approach to risk management and governance arrangements in relation to taxation

2.1 Governance

Responsibility for the tax strategy, the supporting governance framework and management of tax risk ultimately sits with the Lufthansa Group Chief Financial Officer. Day-to-day responsibility for each of these areas sits with the Head of Corporate Tax.

The Lufthansa Group's tax strategy aligns with the Lufthansa Group's wider risk and control framework. Key risks and issues related to tax are escalated to and considered by the Corporate Tax Department. 

2.2 Tax risk management

The Lufthansa Group operates worldwide and is exposed to a variety of tax risks. The Lufthansa Group aims to manage tax risks in a similar way to any area of operational risks across the Lufthansa Group. The business is supported by oversight functions, including the Corporate Tax Department and Internal Audit. 

Lufthansa Group monitors the activities and responsibilities of the Corporate Tax Department. The Lufthansa Group will continue to look at resourcing and will assess headcount within the function as the scale and complexity of the business evolves.

Where appropriate, Lufthansa Group looks to engage with tax authorities to disclose and resolve issues, risks and uncertain tax positions. The subjective nature of global tax legislation means that it is often not possible to mitigate all known tax risks. As a result, at any given time, the Lufthansa Group may be exposed to financial and reputational risks arising from its tax affairs.

3. Tax risk appetite

As with our broader business risk appetite, we have a low tolerance towards tax risks (across all taxes). We seek to minimize the risk of a dispute with HMRC by being open and transparent about our tax affairs. 

The tax consequences of significant transactions (incl. internal restructuring and changes to IT systems) are considered by the senior stakeholders (incl. Corporate Tax Department) as part of their deliberations on the transactions in question. Wherever relevant, we would also seek the opinion of external advisors to ensure that the tax impact of any transaction is aligned with our Corporate Responsibilities. 

4. Approach towards dealings with HMRC

The Lufthansa Group seeks to comply with its tax filing, tax reporting and tax payment obligations worldwide. Corporate Tax Department is required to foster good relationships with HMRC. In particular, Corporate Tax Department will: 

  • Pro-actively manage Lufthansa Group’s relationship with HMRC with the aim of minimising the risk of challenge, dispute or damage to its credibility
  • Participate in any tax authority formal consultation process where it is expected that the matter under consultation will have a material impact on the Lufthansa Group’s liability or the Lufthansa Group’s tax compliance management

Lufthansa acknowledges a responsibility to pay an appropriate amount of tax in the countries where the Lufthansa Group operates. The Lufthansa Group will aim to balance this with the responsibility to our shareholders to structure the Lufthansa Group’s operations in an efficient manner. Tax regulations and tax incentives may be one of several economic factors taken into consideration when structuring our operations. In certain instances where significant uncertainty or complexity is involved, we will seek external advice. 

In summary, Lufthansa Group is committed to ensuring it pays the right amount of tax in the UK and to working collaboratively with HMRC.

1) This strategy applies for the year ending 31 December 2017.