Corporate Governance

The division of duties within the Management Board and the procedures of the Management Board are laid down in the enclosed set of rules:

The division of duties within the Supervisory Board and the procedures of the Supervisory Board are laid down in the enclosed set of regulations rules:

The Supervisory Board has established three key committees in accordance with the Code. The composition of the committees are set out below, and respective committee rules are attached:

Audit Committee
The Audit Committee’s members are:
I. Arntsen, Chair
P.E. Jager
H.A. Mercer

Appointment and Remuneration Committee
The Appointment and Remuneration Committee’s members are:
R.IJ. Baan, Chair selection and appointments
A.S. Castelein, Chair remuneration
B. Bajolet

Technical and Commercial Committee
The Technical and Commercial Committee’s members are:
A.S. Castelein, Chair
I. Arntsen
B. Bajolet

Profile of the Supervisory Board’s scope and composition

The Supervisory Board has drawn up a retirement schedule in order to avoid, as far as possible, a situation in which many Supervisory Board members retire at the same time.

Governance
Risk management is core to the activities conducted by our company. Whether on- or offshore. Within SBM Offshore the Management Board is responsible for the Company’s risk profile and policy, which are designed to realize the Company’s objectives, to assess and manage the Company’s risks and to ensure that internal risk management and control systems are in place. The operation and performance are monitored in an annual assessment by the Management Board and discussed with the Supervisory Board. This monitoring covers all material measures relating to strategic, operational, financial, compliance and reporting risks. Among other considerations, attention is given to observed weaknesses, instances of misconduct and irregularities and indications from whistle blowers.

Management Approach
The Group Risk & Control (GRC), which ultimately reports to the Chief Financial Officer, has a leadership role in proactively facilitating the Management Board and management in its role to manage risks, both from a strategic and an operational perspective. The Group Risk & Control bring the skills to support the business in identifying and managing risks, thereby ensuring the risks are managed within the Risk Appetite in order for the Company to achieve its strategic goals and objectives. As a sounding board, the Risk Assurance Committee (RAC) reviews the significant risks faced by the Company and the relevant control measures. The RAC guards an integrated risk management approach by bringing together the key heads of functions across the second and third line.

The payment of taxes is a key element through which SBM Offshore seeks to fulfil its commitment to contribute to the economic and social development of the countries and communities where we operate. Our tax strategy embodies our Values (Who We Are – SBM Offshore) and is designed to support the delivery of our strategy. As such SBM Offshore:

• Embraces tax transparency and supports public initiatives for greater transparency and accountability of businesses
• Supports a pro-active stance in terms of compliance and values engagement with tax authorities
• Believes that commercial considerations and substance should drive business structures
• Supports reforms to tax businesses based on where value is created
• Supports initiatives to increase the fairness and effectiveness of tax systems.

SBM Offshore’s tax strategy is based on principles related to the following six themes, which we regard as key to fairness for all and to fulfill our mission, and are further detailed in this document:

1. Accountability & governance
   2. Compliance
   3. Structure
   4. Relationships with authorities
   5. Tax rulings & Incentives
   6. Transparency

Our Tax Strategy

SBM Offshore operates in a global context with competitors, clients, suppliers and a workforce based around the world. SBM Offshore provides floating production solutions to the offshore energy industry, over the full product lifecycle through construction, operation and decommissioning.

In the countries where we operate, we seek to develop and maintain our business on a sustainable basis. We contribute through employment, training, local investment and also through payment of various taxes. These include corporate income tax, withholding tax, sales tax, taxes on wages and salaries, custom duties and other state or indirect taxes as appropriate.

The lifecycle of a typical project would involve an engineering phase in Europe or Asia and a construction phase in Asia, Africa or South America. For lease & operate projects, upon commissioning, SBM Offshore will lease and operate the asset to the benefit of its client for the duration of the lease contract. At the end of the contract, SBM Offshore will proceed to the decommissioning of the asset in a yard which can be in a different jurisdiction than the country of operations.

In each of those jurisdictions, SBM Offshore is committed to be taxed in accordance with its economic substance and value creation. Its clients at present are mainly offshore oil and gas producing companies.  As part of SBM Offshore’s responsibilities, SBM Offshore endeavours to serve all stakeholders involved in a given project including investors, suppliers, employees and tax authorities.

Accordingly, SBM Offshore aims to pay the proper amount of tax on the profits we make, and in the countries where we create the value that generates those profits. Achieving this goal requires a careful and consistent application of the tax principles as set out herein.

When the relevant regulations are not clear, tax authorities in the countries of operation may see technical positions in a different light than us and this may sometimes lead to disagreements. This could notably happen in the area of transfer pricing. When such conflicts arise, we deal with them based on the principles as set out in this document.

One of our main challenges is to ensure that we pay tax only once on the profits and that we pay tax in the appropriate jurisdiction.

Tax is aligned with the business and is not a profit centre in itself. However, SBM Offshore’s tax strategy is not only guided by the business objectives of the SBM Offshore Group, but also by its Values (Who We Are – SBM Offshore), its Tax Principles and the sustainability strategy of the SBM Offshore Group. Just like the tax strategy of the SBM Offshore Group, the Tax Principles are approved by SBM Offshore’s Management Board and provide the guiding principles to exercise this tax strategy.

We support the OECD international tax reform work on Base Erosion and Profit Shifting (BEPS) and the resulting EU initiatives such as the Anti-tax Avoidance Directives or the DAC 6 Directive implementing a Mandatory Disclosure Regime. Similarly, we support OECD initiatives to enhance tax transparency and for a global minimum effective taxation assuming the inclusion of a global ETR safe harbor to account for our aggregate global tax contribution. As a global business, we support initiatives to harmonize tax concepts in order to avoid competing claims from different jurisdictions.

We endorse the B Team Responsible Tax Principles (A-New-Bar-for-Responsible-Tax.pdf (bteam.org)) which were developed by a group of companies committed to have taxation playing a central role to move towards the UN’s Sustainable Development Goals (SDGs).

Our tax strategy and more generally our approach to tax set out in this document apply to all countries of operations of the SBM Offshore Group including the United Kingdom where it meets the requirements of Finance Act 2016 Schedule 19 Part-2.

Our Tax Principles

Our tax strategy is based on the six following fundamental principles, which we regard as key to fairness for all and to our fulfilling our mission.

1. Accountability & governance

We have the mechanisms in place to ensure awareness of and adherence to our tax strategy and principles. We provide both relevant training to internal stakeholders and opportunities for employees to raise any issues of concern confidentially, consistent with the SBM Offshore Code of Conduct (Ethics and Compliance – SBM Offshore).

The Management Board and the Supervisory Board’s Audit and Finance Committee receive reports on tax strategy, tax principles and updates on tax regulations and the key tax issues we are facing. The Audit and Finance Committee receives an annual update on the SBM Offshore Group’s effective tax rate, tax provisions and tax footprint in the various countries of operation.

SBM Offshore’s Tax team is part of our Finance function, which reports to the Chief Financial Officer. The Group Tax Director has functional accountability for a team of around fifteen people with different geographic and technical responsibilities. Our people are appropriately qualified and trained professionals, with the right level of expertise and understanding that we constantly seek to improve.

The Tax team has established long term relationships with external tax advisors who bring technical support whenever needed but we always retain full responsibility for adherence to our tax principles.

2. Compliance

We comply with the tax legislation of the countries in which we operate and pay the proper amount of tax on time, on the profits we make and in the countries where we create value. We are committed to comply with the spirit as well as the letter of the law.

We do not condone, encourage or support tax evasion as tax evasion is in clear contravention of SBM Offshore’s tax principles and SBM Offshore Anti-Bribery and Corruption Policy. Doing so risks criminal prosecution of the individuals involved, as well as placing unnecessary risks on SBM Offshore. We maintain a zero-tolerance approach to dealing with such behavior.

Just like the Anti-Bribery and Corruption Policy applies to tax matters, the Integrity Reporting Policy and the Integrity Reporting Line (SBM Offshore’s whistleblowing mechanism) of the Group is available for tax-related matters.

Transfer pricing

We pay the proper amount of tax according to where value is created within the normal course of our business activities.

Optimizing our business means we can offer clients breakthrough technical solutions quickly, which creates value for our clients and our shareholders. As a result, there are many transactions between SBM Offshore Group companies, and the transfer pricing for these transactions must reflect an arm’s-length or market price. Our pricing is driven by the activities undertaken and the value created in each part of our business and is in accordance with the OECD transfer pricing guidelines.

We ensure that our transfer pricing policies are consistently applied and are in line with OECD guidelines and applicable local regulations. In addition, when aligned with the business model and provided for by local regulations, we also apply for Advance Pricing Agreements with tax authorities. We are committed to pay the proper amount of tax but we also want to avoid competing claims on the same income from different jurisdictions.

3. Structure

We do not use artificially fragmented structures or contracts that are intended for tax avoidance, are not driven by commercial considerations or do not meet the spirit of local or international law. A typical FPSO structure looks as follows:

The jurisdiction of incorporation of entities for associates, joint-ventures and jointly-owned companies is disclosed in our Annual Report. Jurisdictions other than those of sites and operations may be selected for incorporation of entities where the absence of double tax treaty agreement would otherwise lead to pay tax twice on the same profit or when the choice of such jurisdictions is dictated by commercial considerations.

Tax Havens

Tax Havens can be distinguished in (1) non-cooperative tax jurisdictions and (2) low-tax jurisdictions.

For non-cooperative tax jurisdictions, we use the EU blacklist of tax havens (i.e. jurisdictions that do not comply with criteria of transparency, fair tax competition or BEPS implementation) and as at December 31, 2021, we had no operating companies in the SBM Offshore Group located in countries qualifying as non-cooperative tax jurisdictions.

As at December 31, 2021, we had several operating companies in the SBM Offshore Group located in cooperative low tax jurisdictions. These companies exist for substantive and commercial reasons; they may be classified in three categories:

• • Fourteen Bermuda companies incorporated between 2002 and 2013, which are either operating companies or holding companies of operating companies:

a. operating companies are all subject to material withholding taxes in the respective countries of underlying operation. As such the purpose of the Bermudan companies is not to divert taxable income from the countries of underlying operations. They rather serve to avoid a double taxation in the case of operations in jurisdictions with no double tax agreement in place;

b. the Bermudan holding companies are not intended to generate profits (beside those arising from timing differences on provision recognition or from their participation, which would be tax exempt under EU participation exemption rules) and therefore do not affect the tax liability of the SBM Offshore Group. Also, the fourteen Bermuda companies of the SBM Offshore Group are all joint ventures and the selection of the jurisdiction was therefore a commercial decision made by several partners and lenders. Accordingly, changing those structures is not something the SBM Offshore Group can do of its own volition.

• • Three Cayman Island companies:

a. two of them are operating companies partially owned by SBM Offshore and established in 2009. As with the Bermudan entities, the selection of the jurisdiction was therefore a commercial decision made by several partners and lenders and changing those structures is not something the SBM Offshore Group can do of its own volition;

b. the third one is a group financing company incorporated in 1992. Its main role is restricted to corporate financing of old group companies operating in West Africa. No new financing was done by this company over the past eight years and so it can and will be phased out by end of 2022.

• • Dormant companies domiciled in various low tax countries and scheduled to be de-registered.

SBM Offshore has not established entities in low tax jurisdictions since 2013 and refrains from using such jurisdictions for new projects unless the choice of such jurisdiction is dictated by substantive and commercial reasons.

4. Relationships with authorities

We seek, whenever possible, to develop strong cooperative relationships with tax authorities, based on mutual respect, transparency and trust. Furthermore, we support initiatives to help develop the capability of tax authorities and tax systems if requested.

We promote open and transparent dialogue with tax authorities and dialogue in advance of undertaking transactions and filing tax returns, when there is an uncertainty about how the tax rules apply to our business.

In the Netherlands, Monaco and Switzerland for instance, we engage with the tax authorities through regular meetings, calls and correspondence every time a material topic needs to be discussed. This allows us to identify potential issues, explore options to resolve any misunderstanding or disagreement and increase certainty on tax positions.

The same approach is taken whenever it is possible in all jurisdictions including with HMRC in the United Kingdom.

We also welcome the opportunity to work with other stakeholders taking into consideration their interests. Through engagement with nonprofit initiatives (such as the B Team Responsible Tax Working Group) and business organizations, we remain informed as to the views and concerns of external stakeholders, and we provide our technical thoughts and relevant business insight to policy makers.

5. Tax rulings & Incentives

We only seek rulings from tax authorities to confirm an applicable treatment and we do so based on full disclosure of all the relevant facts and circumstances.

Tax incentives are government measures that are designed to influence business decision-making by incentivizing or encouraging a particular economic activity, by providing a more favorable tax treatment for certain activities or sectors compared to that which generally applies. We seek to use tax incentives only where they are aligned with our business and operational objectives and where they are based on economic substance.

6. Transparency

We are transparent about our approach to tax. We provide regular information about our approach to tax and total taxes paid.

The SBM Offshore Group is required to file a detailed report in accordance with BEPS action 13 as is now implemented in Dutch tax law. The disclosures contained in the country-by-country reporting (‘CbCR‘) are prepared to meet the OECD requirements and are filed with the Dutch tax authorities.

Tax Risk Framework

For us to succeed in today’s rapidly changing world with constant expansion of complex international tax regulations and reporting requirements, we need to manage risk. To achieve this, we embed risk management into important decisions and day-to-day operations, channeling it proactively and positively, in line with our tax principles. We have a low appetite for taking tax risk and so we proactively seek to identify, evaluate, manage and monitor that risk to ensure it remains in line with the SBM Offshore Group’s risk appetite.

Risks are managed through our Tax Risk Framework. This sets out the key tax risks and the mitigating actions that we take to manage and monitor those risks.

Risks are monitored by the Tax team on a quarterly basis through review of all our tax exposures and provisions. The Tax Risk Framework also includes a semi-annual review of compliance with our Tax Principles by the Management Board and the Supervisory Board’s Audit and Finance Committee. When the results of the review identify such a need, it would lead to an update of the tax strategy and of the underlying tax principles

As part of this review, a tax in-control statement is issued by the Group Tax Director, validated by the Management Board and presented to the Supervisory Board’s Audit and Finance Committee. Furthermore, the Group’s Internal Control department performs a regular formal review of Internal Controls over Financial Reporting, including tax controls.

SBM Offshore is subject to tax in multiple jurisdictions. Tax legislation is often complex and constantly evolving. Significant judgement is required, and tax positions are sometimes subject to interpretation including by local tax authorities. Our risk management policy sets out the actions to mitigate our tax exposure and to ensure we assess and report appropriately our uncertain tax positions

• • As part of our tax policy, all assessments, tax audits and notifications received from local tax authorities are centralized at SBM Offshore Group level.
  • When necessary, SBM Offshore engages with local tax advisors who provide advice on the expected view of tax authorities on the treatment of an uncertain tax position.
  • SBM Offshore considers any change in tax legislation and using knowledge built, based on prior cases, to make an estimate on whether or not to provide for any tax payable.
  • SBM Offshore takes into account any dispute resolutions, case law and discussions between peer companies and the tax authorities on similar cases over any uncertain tax treatment.

SBM Offshore determines the probability that a tax authority will have a different interpretation of a tax position. The corresponding risk is assessed and reported to Group Control and to the Management Board and the Audit and Finance Committee of the Supervisory Board on a regular basis in accordance with approved Group policies.

We continue to improve the quality of our Tax Risk Framework through the use of technology, including tools to consolidate, share and report data accurately. We have developed and deployed software to ensure the quality of our tax reporting.

Technology has a large impact on the tax function. By using it to increase the quality and quantity of data, SBM Offshore is in a position to better assess the application of its tax principles.

Tax Reporting

The SBM Offshore Group consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as well as Directional reporting, which is presented in the Financial Statements under Operating segments and Directional (“Directional”) reporting.  Directional reporting represents a pro-forma accounting policy which essentially assumes all lease contracts are classified as operating leases and all vessel investments are proportionally consolidated and so is more closely aligned with the cash generation of the company. For more detail on the main principles of Directional reporting reference is made to section 4.3.2 of the 2021 Annual Report.

SBM Offshore’s business generates considerable tax income for the governments in the countries in which we operate. In addition to corporation taxes, we pay and collect numerous other taxes. These include employee taxes, sales taxes, customs duties and local transaction taxes. During 2021, we made global tax payments of US$ 263 million (2020: US$247 million) as disclosed below. See also our Tax Contribution per Juridisction

Total tax paid and/or payable by type in 2021 (Directional reporting)

Notes:

• Under IFRS, the amount stands at US$ 62 million

• Corporate income tax includes withholding tax.

There are a number of reasons why the corporate tax cash payments in a particular year will be different from the corporate tax charge in the financial statements, including deferred taxes and provisions for uncertain positions.

• • Deferred tax: The Group tax charge includes deferred tax resulting from timing differences between the recognition of gains and losses in the financial statements and their recognition in tax computation.
  • Provisions for uncertain tax positions: We are subject to taxation in our countries of operation. At times, despite engagement with tax authorities, there might be an uncertainty whether our approach to a given tax matter will be accepted by the competent tax authority. As a result, we may need to make provision for possible tax payments in future years and this provision is usually estimated based on the single-most-likely amount method.

SBM Offshore Effective Tax Rate in 2021

SBM Offshore reports its financials based inter alia on the Directional reporting method as defined and for the reasons explained above under Tax Reporting.

Under Directional reporting, the effective corporate income tax rate (“ETR”) for the year 2021 was 36.8%. This is our worldwide corporate tax charge in the SBM Offshore 2021 consolidated income statement under Directional of US$ 72.1 million (2020: US$ 41.7 million), shown as a percentage of the worldwide Group profit before tax.

If an adjustment were to be made to exclude the largest extraordinary items such as uncertain tax positions, the Directional ETR for 2021 would be c. 38%.

Under IFRS, our ETR in 2021 was c.16.3% (2020: c. 11%). This is our worldwide corporate tax charge in the SBM Offshore 2021 consolidated income statement under IFRS of US$ 71 million (2020: US$ 38 million), shown as a percentage of the worldwide Group profit before tax. The difference between IFRS and Directional can mainly be explained by the fact that under IFRS, significant taxes actually paid by what under IFRS are termed uncontrolled joint ventures that own and operate leased vessels, are not separately identified.

SBM Offshore’s future tax charge and effective tax rate could be affected by several factors. First and foremost, SBM Offshore’s ETR is heavily influenced by the evolution of the statutory tax rate of jurisdictions of operations of the FPSO fleet and the relative weight of those jurisdictions in the fleet portfolio. Over time this may change as new assets are commissioned and other assets get decommissioned. Also affecting the ETR are changes in tax laws and their interpretation, still to be determined tax reform proposals in the EU, the continuing OECD international tax reform work, as well as the impact of acquisitions, disposals and any restructuring of our businesses.