KBank Tax Policy

1. Tax Code of Conduct:

KBank operates business with full responsibility in taxation for stakeholders, based on integrity, transparency, prevention of tax evasion and compliance with tax laws and in alignment with KBank Statement of Corporate Governance Principles, in order to create value to the national economy and society.

2. Tax Risk Management:

Tax Control Framework has been established in line with KBank Risk Management Policy, based on international standards, as well as sound governance and efficient control of tax risk.

3. Tax Transparency:

KBank Tax Policy has been disclosed transparently for understanding and trust among stakeholders, in a fully complete and accurate manner, and in accordance with all regulatory requirements.

        
Tax Code of Conduct

• Compliance
  KBank adheres to and complies with the spirit and letter of all applicable laws. We act in accordance with the legal and/or regulatory requirements governing the disclosures of financial and tax information to competent government officials or relevant organizations, including the general public.
• Tax accountability
  Holding accountable to all stakeholders, KBank operates our business to ensure stable and sustainable growth, with integrity, transparency and prevention of tax evasion, by emphasizing accuracy in taxation system and using tax incentives, as specified by laws and in accordance with business strategies, for maximum benefits of shareholders.
• Tax payment and structure
  KBank pays tax whereby value is created within the normal course of commercial activity and is committed not to transfer value to low tax jurisdictions. KBank does not use tax structures that are intended for tax avoidance and have no commercial substance. Secrecy jurisdictions or so-called “tax havens” are not used for any tax avoidance but being served as a channel for funding and liquidity access, while also adding diversity to our operations and minimizing funding source concentration. We have clearly defined policies for efficient financial management that comply strictly with regulatory requirements. Furthermore, we pay tax of all overseas branches in compliance with local law in the countries where the Bank operates. Revenues earned and expenses incurred both domestically and internationally are completely included in corporate income tax calculations according to the Thailand Revenue Code.
• Transfer Pricing
  Transactions between KBank and related entities or persons are conducted under the arm’s length principle, so that recognition of income and expenses used as the basis for tax payments will be in compliance with the law.
• Tax incentives
  KBank aims to utilize available tax incentives efficiently and legally within the context of sustainable and appropriate business operations. Tax incentives include tax exemption, additional tax deduction for some periods of time or other incentives. All of those tax incentives are under national or local tax policy and would be applicable to any business that meets all relevant criteria.
• Relationship with tax authorities
  Pursuant to relationships with tax authorities, KBank respects the right of local governments to determine their own tax structures, tax rates and tax collection mechanisms in each country. We seek an open and constructive communication with the tax authorities in pursuit of professional and efficient relationships.
• Code of Conduct
  KBank’s employees are required to strictly comply with the Code of Conduct to prevent tax risk that could damage KBank.
  

KBank has established risk management policy as an integral part of our organizational culture. Risk management is taken into account when formulating our strategies and undertaking our business operations to support business growth, thus ensuring sustainable profitability and maximization of returns for shareholders and investors.

KBank’s tax risk management consists of two parts, as follows:
1. Tax Control Framework that is on a par with international standards; and   
2. Tax Risk Governance with well-defined duties and responsibilities

KBank has placed particular emphasis on effective tax risk management and governance with well-controlled operations to promote efficiency and transparency and ensure that the Bank complies with the tax laws and regulations of each country wherein KBank operates.

1. KBank Tax Control Framework comprises three dimensions, as follows:   

Tax Risk Internal Control
KBank has set out our tax risk internal control principles as described below:

1.1 Control Environment
    KBank has put in place a proper tax control environment to clearly determine the roles and responsibilities of employees at all levels and a management structure (segregation of duties). This is also in line with sound internal control.

    We have also established a Product Management Framework (PMF) to control product and service management to ensure its efficiency and compliance with regulatory requirements and tax regulations. Roles and responsibilities have been defined for all operational units. All processes have been approved by KBank’s management.

    In addition, there is a Conduct Risk Management Policy that sets standards for employees of all levels and departments towards compliance with KBank’s regulations to prevent any damage to KBank.

1.2 Tax risk assessment and control

• Tax risk identification – All KBank’s units that are risk owners are required to identify key tax risks based on their business activities or operation including the types, causes and factors of tax risks. Based on our analyses, different business activities will lead to different tax risks. We also consider the implication of external factors, such as changes in tax laws and regulations, the difference between tax culture and tax compliance requirements in each country or jurisdiction wherein the Bank operates, and the uncertainty of new tax laws that need to be interpreted.   
• Tax risk assessment – KBank has in place the processes of tax risk analysis and assessment, in order to prioritize our risk management items, with consideration of both monetary impacts, such as tax amounts, and non-monetary impacts, such as the Bank’s reputation, customer satisfaction and relationships with government agencies.   
• Tax risk monitoring and control – KBank has established the control procedures to be performed at all levels of the entity to ensure that the key tax risks are eliminated or mitigated. This includes the control activities to manage or reduce the impacts of potential tax risks to be in line with risk appetite. The efficiency of control procedures has been reviewed regularly.   
• Tax risk reporting – The systematic reporting processes are developed in order to ensure that tax risks have been reported to the management on a timely and accurate basis.

1.3 Information system and internal communications

• KBank has established an information system to ensure that sufficient, up-to-date and timely information necessary for tax risk management has been maintained properly, safely and accessibly by relevant units or persons. The system has also been monitored and examined by an independent risk management unit.   
• There is a control process for accounting recording in respect of all tax areas to ensure that such tax-related information is complete, accurate and reliable.   
• Efficient communication procedures have been established within KBank to assure common understanding of and adherence to tax compliance obligations.

Tax Risk Areas
KBank pays due attention to tax risk management by emphasizing regular and timely monitoring and evaluation of potential tax risks. The areas of potential tax risks could be summarized as below:

• Compliance risk – the risk of non-compliance with tax laws’ requirement which may lead to inaccurate or delayed tax payment. The risk could be caused by a lack of tax knowledge, complications of tax laws, etc.   
• Operational risk – involves non-compliance or inappropriate operations, due to inefficiency level of the internal control system or operations that do not meet the established internal control standards.   
• Transactional risk – is associated with specific or complicated transactions undertaken by the Bank. The uncertainty as to how relevant tax laws will be applied may lead KBank to seek external tax advice on the proposed transactions.   
• Financial accounting risk – involves financial information related to tax that could be caused by changes in tax laws, accounting policies and IFRS/GAAP.   
• Reputational risk – concerns possible impacts on the reputation of KBank and our subsidiaries.   
• Management risk – the risk of insufficient, inexperienced or improper resources provided under functions relevant to tax. This also includes the procedures to ensure regular exchange of information, knowledge and experiences among the staff members.

Key Types of Tax

KBank is aware of risks that may be incurred from differences of laws and regulations of each country. Non-compliance with regulatory requirements will adversely affect our reputation. In addition to our study to understand the laws related to KBank’s business operations in each country, we always consult external tax advisors on any complicated tax issues that need to be interpreted. Important taxes relevant to our business operations include corporate income tax, withholding tax, specific business tax and value added tax.

Corporate Income Tax

• In utilization of available corporate income tax incentives, KBank aims to gain full understanding of all relevant criteria required by laws. The appropriate monitoring process has also been established to ensure that the Bank fully meets the stipulated requirements and conditions, in order to efficiently and legally take advantage of certain tax incentives.   
• KBank regularly monitors possible changes in tax laws as a result of government policies, based on the processes to analyze opportunities and impacts in various dimensions, for example, business operations and work systems. The analyses are submitted to KBank management for proactive planning.

Withholding Tax

• KBank is aware of cross-border withholding tax exposures influenced by the application of tax treaties. As a result, KBank has established a guideline summarizing the application of tax treaties based on the Bank’s business operations in each relevant country.   
• Due to the complexity of local withholding tax rates, KBank has implemented an application system to deduct withholding tax from relevant transaction automatically. Such system has been tested regularly to ensure that the withholding tax rates are up-to-date.   
• A proper procedure of crediting both local and foreign withholding taxes in the corporate income tax payment has been clearly set at a Bank-wide level to ensure that the application of tax credit aligns with the Revenue Department’s requirements.

Specific Business Tax

• Most of incomes generated from banking activities, such as interest income, and gain (loss) in foreign exchange, are subject to specific business tax. KBank has implemented an application system to centralize income generated from various channels of banking activities to ensure that the Bank submits specific business tax in an accurate, complete and timely manner.   
• Income from new transactions based on financial innovations may be difficult to define whether they are subject to specific business tax or not, and careful judgment will be required. Tax advice must be sought from external advisors or discussed with related tax authorities prior to initiating any actions to ensure that KBank’s practice is in line with tax laws.

Value Added Tax

• KBank businesses subject to VAT include credit card services, securities business and bancassurance. VAT payment is based on a net settlement basis between output VAT and input VAT. KBank has implemented an application system to centralize output VAT and input VAT to ensure that the Bank’s VAT payments are accurate, complete and timely.   
• Since the government tends to increase VAT rates or broaden the VAT base, KBank has prepared to ensure that our capabilities are in place to meet any future requirements.

2. Tax Risk Governance
KBank has established Risk Management Structure as clearly disclosed in the Annual Reports. Audit Committee conducts tax risk management reviews on a quarterly basis to ensure appropriate risk management.

Tax Transparency

KBank realizes the significance of management and business undertakings in accordance with the Statement of Corporate Governance Principles. Information to be disclosed shall be transparent and in compliance with the regulatory requirements. We also consider what should be disclosed in order to enhance understanding among all stakeholders.

• KBank has disclosed our tax policy to the general public via KBank’s website. The disclosed information is transparent and easy to understand, and also in accordance with KBank Disclosure Policy.
  
• The disclosure of information subject to regulatory requirements shall meet the timeline as specified by laws, government agencies, or KBank’s supervisory agencies, classified by types of information.
  
• KBank aims to cooperate with tax authorities in all jurisdictions wherein we operate. Information given to fulfill tax authorities’ request and inquiries is accurate, transparent and in compliance with regulatory requirements.
  
• KBank discloses information on income and income tax, classified by geographical areas in the Notes to Financial Statements to inform all stakeholders of KBank’s contribution to economic development of areas wherein we operate.
  
  

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