Page 16 - BHP Economic Contribution Report 2020

Approach to transparency and tax continued

Intra-group transactions In addition to our Sales and Marketing business, we have
teams from Technology, Finance, External Affairs and
We disclose our material transactions through the lodgement Human Resources based in Singapore to support our activities
of our tax returns and other disclosures to revenue authorities. in the region.
For example, in Australia, as part of our corporate tax returns,
we lodge detailed International Dealings Schedules, which Profits made by our Singapore Sales and Marketing business
quantify, by type, the transactions between the entities of our The Singapore Sales and Marketing business earns a small
Australian tax consolidated groups and offshore related parties. margin on its sales in line with the risks and activities undertaken
We comply with the OECD’s country-by-country reporting and the value added. In relative terms, our Sales and Marketing
requirements as implemented in each of the countries in which profits are small compared with the profits made in Australia
we operate. For example, in Australia, we lodge certain transfer from our Australian operations and the profits from our global
pricing related documentation and country-by-country reports operations. In FY2020, our main Singapore Sales and Marketing
in accordance with the taxation laws and the Australian business made profits of approximately US$558 million
Taxation Office’s requirements. This information provides tax on global commodities sales, representing approximately
authorities with details of how we operate our business and 4.3 per cent of the FY2020 profits of our Australian operations
conduct our tax affairs around the world. We support the (US$13.1 billion) and approximately 4.1 per cent of the FY2020
voluntary publication of country-by-country data and we profits from our global operations (US$13.5 billion).
will publish our FY2019 data on our website at bhp.com. Taxation
Consistent with our commitment to transparency, we have In FY2020, all the profits (of approximately US$558 million)
voluntarily included in this Report information about material of the Singapore Sales and Marketing business were exempt
transactions between companies in the BHP Group. Outlined from income tax in Singapore under a tax incentive that the
below are the top four dealings (by quantum) between our Singapore Government has granted BHP (with effect from
Australian business and non-Australian related parties. FY2021, under this incentive this income will be subject
to corporate income tax at a reduced rate). This is one of a
Our Sales and Marketing business range of incentives that is legislated and open to all taxpayers
Sales and Marketing is an independent core business of BHP. in Singapore if they can demonstrate significant contribution
It is the link between BHP’s global operations and our global to the economy and meet the ongoing quantitative and
customers. Our Sales and Marketing business adds value to qualitative criteria set by the Singaporean Government.
BHP and the countries in which we operate, by ensuring we In FY2020, BHP Group Limited increased its indirect legal
receive the maximum price for our commodities. It achieves ownership of the entity conducting the Singapore Sales and
this by finding the best markets for our commodities, liaising Marketing business (BHP Billiton Marketing AG or BMAG) from
closely with our customers on their specific product 58 per cent to 100 per cent, in accordance with the settlement
requirements and coordinating logistics to deliver the agreement entered into with the Australian Taxation Office
commodities to our customers. For export sales from Australia, (ATO) in 2018 to resolve a long-standing transfer pricing
our Sales and Marketing business typically buys the dispute. The dispute related to the price at which commodities
commodities from our Australian production assets, arranges are sold to our Singapore Sales and Marketing business.
the freight and other logistics and sells the commodities to its As a result, 100 per cent of the profits made by BMAG from the
customers. In some instances, it will provide services to the sale of our Australian commodities acquired from entities
production asset and act as its agent. controlled by BHP Group Limited are taxed in Australia, from
Location 1 July 2019, at the normal corporate tax rate of 30 per cent,
Our Sales and Marketing business offices are located close to under the Australian Controlled Foreign Company rules.
our customers in our key markets. In addition, in March 2020, the Australian High Court handed
As Asia accounts for 86.7 per cent of our revenue, our global down its decision in relation to an existing dispute between the
minerals Sales and Marketing business is headquartered ATO and BHP on whether BHP Group Limited and BHP Group Plc
in Singapore. For proximity to oil and gas markets, our are ‘associates’ for the purposes of the Australian Controlled
petroleum Sales and Marketing business is headquartered Foreign Company rules. The High Court ruled that BHP Group
in Houston, United States. Our Sales and Marketing business Limited and BHP Group Plc are ‘associates’ and therefore, profits
has approximately 340 employees and contractors globally, made by BMAG from the sale of our Australian commodities
with 130 of these in Singapore. Other smaller offices are acquired from entities controlled by BHP Group Plc are also
strategically located around the world. Singapore is the Asian taxed in Australia at the corporate tax rate of 30 per cent.
centre for global commodities trading and is home to the vast
majority of the world’s largest commodity trading companies.
Singapore is a world leader in logistics capability and
provides a base for world-class connectivity with an effective
transportation network. It also provides a stable and transparent
regulatory framework that supports trade and investment.
Singapore’s high living standards attract highly qualified people
and it has a large pool of commodities trading talent in Asia,
providing a highly skilled and diverse work force.

14 BHP Economic Contribution Report 2020