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MTN Group Limited Tax report for the year ended 31 December 2020
Leading digital solutions for Africa’s progress 01 Tax report
Contents
01 TAX REPORT 1 Salient features 2 Foreword 3 Economic contribution 4 Current tax environment (international) 6 MTN’s approach to tax 8 Continuous improved tax governance and transparency
MTN is an emerging market mobile operator at the forefront of technological and digital changes. Inspired by our belief that everyone deserves the benefits of a modern connected life, we provide a diverse range of voice, data, digital, fintech, wholesale and enterprise services to more than 280m customers in 21 markets.
We were established in South Africa at the dawn of Our online reports: democracy in 1994 as a leader in transformation. Since AFS CDP GRI IR then, we have grown by investing in sophisticated communication infrastructure and by harnessing the Annual Carbon Global Integrated Financial Disclosure Reporting Report talent of our diverse team of more than 19 000 people to Statements Project Initiative now offer services to communities across Africa and the KIV SR TAX Middle East. MTN is one of the top 40 companies listed on King IV™ Sustainability Tax the JSE in Johannesburg, with a market capitalisation of application Report Report R108 billion at the end of 2020.
MTN Group Limited Tax report for the year ended 31 December 2020 01 Tax report Salient features
Group total tax contribution LA Group revenue R35,1bn R179,4bn 2019: R30,5bn 2019: R151,5bn
Group profit before tax Adjusted Group profit before tax R29,1bn R25,5bn3 2019: R17,7bn1 2019: R16,9bn
Reported Group effective Adjusted Group effective tax rate tax rate 32,45% 37,78%4 2019: 38,95%2 2019: 40,89%4
Taxes on production5 Taxes on profit6 R16,6bn R7,7bn 2019: R15,9bn 2019: R8,3bn
1 Restated Group profit before tax. 2 Updated Group effective tax rate due to restated Group profit before tax. 3 Adjusted Group profit before tax represents Group profit before tax as reported excluding: Impairment of goodwill and investment in joint ventures (2020: R1,07 billion and 2019: Rnil); Non-taxable gain from sale of Ghana and Uganda Tower InterCo BV/(from Jumia dilution and sale of Amadeus and Travelstart) (2020: -R6,13 billion and 2019: -R1,04 billion); Nigeria regulatory fine and related expenses (line item includes unwinding interest on the Nigeria fine liability and the amortisation of fees related to the listing of MTN Nigeria) (2020: R0,2 billion and 2019: R0,2 billion); and Impairment loss on remeasurement of non-current assets held for sale (2020: R1,51 billion and 2019: Rnil). 4 The adjusted Group effective tax rate is calculated by dividing the Group reported tax number (after adjusting for the tax impacts of the numbers included in footnote 2 above, as applicable) by the adjusted group profit before tax. 5 Taxes on production are made up of all indirect taxes and withholding taxes collected and borne by MTN. 6 Taxes on profit are made up of corporate taxes borne by MTN, education tax borne by MTN and dividend taxes borne and collected by MTN. LA Limited assurance. Assurance report and definition available at www.mtn.com.
MTN Group Limited Tax report for the year ended 31 December 2020 1 01 Tax report Foreword
Tax transparency requires that companies move beyond merely providing their tax numbers and performance. In the ‘MTN’s approach to tax’ section of this year’s report we have endeavoured to provide readers with an understanding of the Company’s approach to tax, risk management, tax planning as well as our views on specific tax risks. We also give our approach to dealing with uncertain tax positions, such as transfer pricing disputes and the MTN Nigeria matter related to the Attorney General of the Federal Republic of Nigeria (AGF). Both are covered in more detail under the ‘Uncertain tax position’ section of this report. We remain committed to building and maintaining cordial relationships with all regulatory authorities, and with all stakeholders. Businesses contribute to enhancing sustainable societies in many ways, with the taxes they pay being just one of these ways. In 2020, MTN Group continued to contribute significantly to the communities in which we operate through, for example, supporting the fight against Acting Group Chief Financial Officer COVID-19 (see page 15 of our Integrated Report); Sugentharen Perumal progressing digital and financial inclusion; promoting local ownership; supporting youth employment and skills development; investing in infrastructure and network In many of the countries within which we operate, MTN is coverage; developing businesses in our supply chain; and one of the biggest taxpayers. With this comes a of course through our contribution to tax revenues. The responsibility to report thoroughly and transparently on latter goes significantly beyond the corporate income taxes our tax affairs. At MTN, this reporting is subject to our paid on our profits. In this report, in the ‘total tax system controls and internal financial controls. We contribution’ section we endeavour to quantify this maintain this in line with our standard processes and contribution, which includes (but is not limited to) corporate procedures on enterprise risk management and taxes, indirect taxes, withholding taxes, payroll taxes, governance. operating licence fees and other payments to government authorities. In the year our total tax contribution amounted In 2020, we prepared and submitted our country-by- to R35,1 billion. country report to the South African Revenue Service for 2019. In their Building Public Trust report published Integrity is one of MTN’s core values: we are committed to in February 20217, PricewaterhouseCoopers (PwC) used transparency, and complete candour is one of our vital extracts from our 2019 tax report as an example of good behaviours. This voluntary report is testament to our tax transparency. This was after an independent review values. It is an effort to explain our tax affairs clearly, panel of the PwC Building Public Trust report commended demonstrate our business’s value creation, and in so doing MTN as the company that best demonstrated consistent improve our business reputation and build and maintain performance in tax reporting8 among the top 100 listed trust with our many stakeholders. We appreciate your companies by market capitalisation on the JSE Limited at interest. 31 December 2019, in the multinational companies’ category. This recognition was for MTN’s clear communication of detailed information on tax-related matters, as well as the positioning of these disclosures Sugen Perumal to demonstrate the Group’s contribution to the societies Acting Group Chief Financial Officer to which we are accountable. Fairland April 2020
7 https://www.pwc.co.za/en/assets/pdf/building-public-trust-through-tax-reporting-2021.pdf 8 https://www.pwc.co.za/en/publications/building-public-trust.html
MTN Group Limited Tax report for the year ended 31 December 2020 2 01 Tax report Economic contribution
As one of the largest mobile operators in our markets, we MTN, as a leading brand in the markets in which we acknowledge that our activities have significant operate, believes we have a key role to play in assisting to implications for the communities in the regions in which we minimise the likelihood of transmission of COVID-19 and its operate. It is vital that we understand exactly who is impact on society. The Group provided essential support affected by our activities so that we can ensure their through the MTN Global Staff Emergency Fund for interests are promoted when strategic business decisions employees and Y’ello Hope packages for our customers, are made. MTN has identified the following as our most communities and other stakeholders. The Group material stakeholders: governments and regulators; civil contributed R107 million through its foundations towards society; the investment community; subscribers/ healthcare and government relief efforts in support of the customers; and MTN people. fight against the pandemic. This support consisted of R58 million donation to six countries as government VALUE DISTRIBUTION relief funds, R40,5 million donated in personal protective Our activities drive economic value within each of the equipment and healthcare support, and R8,4 million jurisdictions in which we operate. This value is distributed contributed towards food security supporting 120 000 to our stakeholders in a multitude of ways only some of people. which are measurable. These include: Our digital inclusion investments continued to lead digital 1. Business solutions for Africa’s progress to broadly span the financial, During 2020, MTN spent R118,0 billion (2019: R119,6 billion) health, education, enterprise and public sector categories, with suppliers and contractors. among others. More detail on MTN’s digital inclusion initiatives can be found in the 2020 MTN Group sustainability We committed capital expenditure of R28,6 billion report in the integrated reports link on our website, (R26,3 billion in 2019). MTN South Africa’s share of capital www.mtn.com. expenditure (capex) amounted to R7,2 billion (R7,6 billion in 2019); and MTN Nigeria’s capex amounted to R12,7 billion 4. Governments (R8,0 billion in 2019). In 2020 we made a significant contribution to government revenues in the regions where we operate. This information In 2021 we will continue to invest in our networks to ensure is detailed in the ‘total tax contribution’ section of this we are ready for the digital revolution and plan to increase report. We are often the largest taxpayer in the markets our capex spend to R29,4 billion (in 2020: R28,5 billion). within which we operate. 2. Employees 5. Digital inclusion In 2020, MTN had 19 295 (19 288 in 2019) employees MTN delivered another solid operational and financial representing 58 different nationalities. We spent performance for the year ended 31 December 2020, under R12,6 billion in staff costs (R10,6 billion in 2019). exceptionally challenging trading conditions. There was In the year, we invested R136 million in employee learning some improvement in trends as COVID-19 lockdown and development (R271 million in 2019). Employees are restrictions eased. This and our well-executed customer actively encouraged to look for opportunities to value management initiatives and segmented customer continuously improve their capabilities and skills through propositions and the expansion of our 3G and extensive training available digitally, face-to-face and from 4G coverage footprint and investment in 5G in SA other sources supplied by the MTN Academy, or from encouraged growth and we added 28,8 million subscribers external accredited and reputable organisations. to reach a total base of 279,6 million and recorded 114,3 million (95 million in 2019) active data users and For details on MTN people and their remuneration 46,4 million (35 million in 2019) active Mobile Money (MoMo) please refer to pages 63 to 97 of the MTN Group’s 2020 users. At the end of December 2020, our aYo insurance Integrated Report. joint venture had 11 million registered policy holders and 3. Corporate social investment (CSI) 6 million active policies. We expanded our instant messaging MTN is committed to leveraging our core capabilities to platform ayoba, making good strides in the year, to record enable the socioeconomic development of the communities 5,5 million monthly active users, an addition of 3,5 million. within which we operate, underpinned by our core belief It has now been integrated into 16 MTN markets and can be that everyone deserves the benefits of a modern, downloaded across many other markets on the Google connected life. Play store, Apple App Store and via the ayoba website as an over-the-top offering. In 2020, MTN’s CSI totalled R168 million (2019: R189,5 million) impacting the lives of 23,8 million members of our communities, 10,5 million (0,345 million in 2019) of which were youth, as the largest and most impacted population group across our markets. Our programmes provided youth with the vital skills, tools, access, knowledge and opportunity to become economically active citizens.
MTN Group Limited Tax report for the year ended 31 December 2020 3 01 Tax report Current tax environment (international)
The 2020 financial year was a tough year globally, with countries having to deal with the challenges posed by the COVID-19 pandemic. Governments had a crucial task to put in place measures to halt the spread of the virus and provide temporary relief to individuals and businesses to safeguard lives and livelihoods. Governments across the world have had to implement emergency tax policies and fiscal tools to inter alia support business cash flows, support affected households, stimulate the economy, fund the healthcare system and provide financial stimulus packages. In response to the challenges businesses face as a result of the pandemic, most African governments have introduced temporary tax relief measures such as waiving of penalties on late payment of taxes, extension of time for the filing of returns, and provisions that allow businesses to fully deduct COVID-19-related costs such as donations. Across the 21 jurisdictions where MTN operates, these are the summary COVID-19 tax measures that were introduced.
Ghana provided various administrative relief in relation to filing deadlines and donations made for the purposes of COVID-19 are treated as tax deductible The majority of countries where MTN has a presence implemented a combination of measures including administrative relief, deferral of tax debt payments for a certain period, waiver of interest and penalties for a limited period, and suspension of tax audits and Nigeria introduced investigations measures including providing administrative relief in relation to filling deadlines, waiver of certain tax debt and penalties on late return, suspension of tax audits, Some countries investigations and monitoring implemented minimal business, and extension of the or no COVID-19 tax VAT exemption for basic food, measures medical and pharmaceutical products
Cameroon introduced measures including the deferral of the social contribution payments for three months, grating moratoriums and deferred payments to companies impacted by COVID-19 and full tax deductibility for donations and gifts made by companies for purposes of fighting the South Africa introduced an array of pandemic measures inter alia: administrative relief for filling deadlines; deferment of tax debt payments, allowing donations made to the Solidarity Fund to be treated as tax deductible; VAT exemption for the importation of ‘essential goods’; the establishment of a COVID-19 Temporary Employer-Employee Relief Scheme (COVID-19 TERS) with the objective that employees are paid a portion of their salary during the temporary closure of their employer’s businesses.
MTN Group Limited Tax report for the year ended 31 December 2020 4 01 Tax report
Current tax environment (international) continued
In the wake of the pandemic, a ‘new normal’ has been Graph A9 established and we expect that the tax landscape will be adapted to address this new normal. MTN Group will continue to monitor and manage the tax risks arising. 2016 – 2019 (%)
The work around Base Erosion and Profit Shifting (BEPS) 40 37,7 37,2 by the Organisation for Economic Co-operation and 35 9,1 32,6 33,5 30 5,0 Development (OECD) continues with the aim to implement 16,6 action plans to assist countries in tackling tax avoidance, 25 20 improve international tax rules and dispute resolution. 15 In 2019, the OECD Secretariat proposals pillar one 10 6,9 (reallocation of taxing rights in a digitalised economy) and 5 (0,5) pillar two (introducing global minimum tax to address tax 0 issues arising from BEPS) were adopted by the Inclusive (5) Framework of the OECD. telco MVNO The efforts to reach a consensus on the Pillar 1 and Pillar 2 margin proposals were stalled due to the pandemic but the MTN opco MTN Group Nigeria fine)
139 members of the BEPS Inclusive Framework have Market share Average Africa US top tier telco committed to address the remaining issues with the view to Market premium Tower ownership results (excluding MTN Group unique reach a conclusion by mid-2021. synergies premium Telecommunication value chain MTN Group operates a decentralised model meaning that almost all of MTN’s Group’s profitability is realised by the in-country operating companies (opcos) in their respective 9 No peer data was available for 2020 at the time of preparation of the Integrated Report. jurisdictions. MTN Group began an exercise in 2018 to perform the value chain analysis for the Group, which is a corroborative economic analysis (over a four-year period) to evaluates the Group’s performance relative to its peers, Graph B below shows the Group EBITDA margins over the and how value (i.e. EBITDA) manifests between: four-year period as compared to its peers (%). a) Group companies who do not engage with customers. b) The MTN opcos who engage with customers. Consequently, the Group sought to assess whether the profits realised by the MTN opcos: 60 52,57 a) Aligns with the functions, risks and the assets of those 50,20 50,28 49,67 group companies (as a stress test for the BEPS project). 50 42,32 b) Is realised in-country (as a stress test of the proposals 40 35,35 35,85 27,55 in the Unified approach). 26,54 25,56 30 27,71 22,31 The outcome of the analysis shows that in the financial 20 year ended 31 December 2019, approximately 98,66% 10 (2018: 97,11%) of profits were realised and taxed in the market jurisdiction where the MTN opcos operate. This is in 0 2016 2017 2018 2019 line with the expectations that the relative contributions ■ Minimum of African peers made by each entity to the overall business are realised at ■ MTN consolidated financial statements the market jurisdiction level. ■ Minimum of African peers Graph A alongside illustrates the different levels of profitability within the telecommunication industry value chain, worldwide, from 2016 to 2019. The graph also illustrates that: •• MTN Group is, on average, performing on par with its peers during the period under review with an EBITDA (adjusted for the fine in Nigeria) of 37,2%. •• MTN opcos have consistently achieved (on average) attractive profit margins of 33,5% EBITDA margin between 2016 and 2019 and have taken reasonable tax positions in the countries in which they operate.
MTN Group Limited Tax report for the year ended 31 December 2020 5 01 Tax report MTN’s approach to tax
Tax governance Tax risk management The MTN Group Board understands and takes accountability One of the fundamental pillars of MTN’s approach to tax is for all risks that potentially affect the achievement of its a tax risk management framework aimed at ensuring that strategic priorities. Derived from an assurance tax risks are properly identified, prioritised and managed in methodology, MTN has implemented robust risk accordance with MTN Group’s integrated risk management management frameworks consisting of proactively process. The Group Board and Group Audit Committee identifying and understanding the factors and events that provide oversight over the tax risk management framework, may impact our strategic priorities, then managing them considering the potential financial, legal, business and through effective mitigation plans, internal controls and reputational risk of failing to detect and manage tax risks monitoring and reporting processes. timeously. The way MTN Group manages its tax affairs is directly Regular and transparent tax reporting is embedded within relevant to its shareholders and other internal and external the governance structures of the Group, including the stakeholders. Considering an increasingly complex tax Group Audit Committee, Executive Committee and the legislation environment, multiple regulatory requirements, Group Board. and the focus of revenue authorities in protecting their tax Tax risk reporting is achieved through the tax risk revenues through the tightening of rules, increased management programme. Reporting is done quarterly to enforcement and improvement of their approach to tax in-country and the Group Board of Directors and Audit collection, there is an increased focus on tax risk and Committee. controls that will mitigate tax risk to an acceptable level. This process ensures that all tax risks across the countries To this end, the MTN Group has developed a systematic within which MTN operates are identified, measured, approach to manage tax obligations and tax risk controlled and monitored within the tax risk tolerance considering that tax obligations and the associated risks levels and managed at the highest governance levels within are managed and monitored by many different personnel, the Group. business functions, systems and processes within the Group. Principles governing MTN’s approach to tax Group Board MTN Group has agreed the following tax guiding principles that support its approach to tax: •• It is paramount to the MTN Group that its tax affairs are managed in such a manner so as not to cause a detrimental effect on the reputation or brand of the Group Audit Committee MTN Group. Accordingly, the commitment of the MTN Group is to act responsibly and in an accurate, transparent and timely manner in respect of its tax Group Exco affairs by fulfilling all compliance, disclosure and Group enterprise risk management reporting obligations, in accordance with the prevailing tax laws in all jurisdictions in which it operates. •• The MTN Group seeks to create and manage shareholder value by undertaking legitimate and responsible tax Group tax planning within the tax laws and regulations of the countries in which MTN Group operates. In this regard, the MTN Group acknowledges that its tax contribution in the jurisdictions in which it operates is significant and Opco board
manages such obligations in a proactive and forward reporting management risk Tax looking manner and in accordance with the prevailing Opco risk and audit committee legislation. Opco enterprise risk management •• MTN is committed to transparent and constructive relationships with revenue authorities. These are based Opco tax department on open and honest communication. The need to foster strong relationships with revenue authorities is critical to For details on our approach to risk refer to page 33 of the ensure the management of tax risk. 2020 MTN Group Integrated Report. Our tax risk appetite is •• The Group commits to ensure there is the necessary very low. We believe all taxes justifiably due must be paid. resource capacity and capability to manage its tax affairs in an efficient and effective manner, including Uncertain tax positions investing in tax knowledge and training of tax resources to ensure they have the requisite skills and knowledge. The Group operates in numerous tax jurisdictions and the •• Tax is integrated into all business processes supported Group’s interpretation and application of the various tax by adequate and robust controls, clear lines of rules applied in direct and indirect tax filings may result in communication, defined roles and responsibilities and disputes between the Group and the relevant tax authority. financial systems that are adequately configured for Tax legislation is often subject to interpretation, particularly specific tax requirements and controls. in the absence of established case law, and as such, creates areas of uncertainty on which management is required to make judgements.
MTN Group Limited Tax report for the year ended 31 December 2020 6 01 Tax report
MTN’s approach to tax continued
The tax risk management programme, through its We believe in open communication and we meet with tax governance, provides for robust processes and controls in authorities on a regular basis to ensure that our business evaluating the tax provisions and the classification and dealings are better understood by the authorities, to disclosure thereof and is an effective enabler in the exchange perspectives on various matters in the course of reporting of these matters. In arriving at the contingent tax tax audits and follow-up questions. liabilities we have also applied IAS 37 guidelines. The We support the initiatives of the African Tax Administration relevant tax provisions and/or contingencies are discussed Forum and closely follow all relevant tax and transfer and agreed with Group Tax and the Group Technical pricing developments and endeavour to be compliant with Accounting teams and are communicated to external audit, all relevant regulations including guidelines by the Group Audit Committee and the Group Board. organisations like the OECD. The Group does not recognise liabilities in the statement of financial position until future events indicate that it is Tax havens probable that an outflow of resources will take place and a The OECD has set out four factors to be considered for reliable estimate can be made, at which time a provision is identifying tax havens: (1) no or nominal tax is levied on raised. Contingent liabilities due to uncertain tax exposures relevant income; (2) lack of effective exchange of across the various tax jurisdictions where the Group information; (3) lack of transparency; and (4) no substantial operates amounted to R1 796 million in 2020 (R1 959 million activities. in 2019). MTN has subsidiaries in jurisdictions that may be defined The most significant contingent tax matters relate to as tax havens. The reason for their existence in these transfer pricing disputes across our operating companies jurisdictions is always based on sound business principles in the tax jurisdictions where we operate. Based on internal and not merely to obtain a tax benefit. MTN International and external legal and technical advice obtained, the Group (Mauritius) Limited and MTN (Mauritius) Investments remains confident that it has a robust legal case to contest Limited, which are registered in Mauritius, are tax residents these exposures. in South Africa. During the year, the AGF formally transferred the Nigerian Advocacy or lobbying activity tax matter to the Federal Inland Revenue Service and MTN seeks to engage openly and proactively with national Nigeria Customs Service and MTN commenced a and international organisations on matters of tax policy reconciliation process with both government agencies. and potential changes to tax legislation to ensure MTN Nigeria is expecting a final report at the end of the regulations promote sustainable investment in the reconciliation. territories in which we operate. This includes information We continued with the application of IFRIC 23 sharing and requesting input on whether subjects for interpretations of the international financial reporting consultation and lobbying are in place or have been standards issued on 1 January 2019 and reclassified monitored in other countries. certain tax provisions to liabilities in the current and prior year. There is no requirement for disclosure of remote tax exposure items with less than 10% possibility of materialising. Relationships with revenue authorities In respect of dealings with revenue authorities, the MTN Group values a good working relationship and maintains these relationships based on the following key principles: •• Transparent, open and honest communications based on credibility and integrity, thereby building mutual trust. Full disclosure of all relevant information. •• A high level of responsiveness to revenue authorities’ queries, by dealing with such in a timely and efficient manner. •• Commitment to early resolution of tax disputes with revenue authorities. •• Do not use any influence to seek preferential or extra- statutory treatment in tax rulings or settlements. •• Seek to boost the capacity of revenue authorities in poorer countries through positive and proactive disclosure and cooperative working practices and to not undermine revenue authorities’ capacity or independence.
MTN Group Limited Tax report for the year ended 31 December 2020 7 01 Tax report Continuous improvement on tax governance and transparency
Tax technology improvement across MTN •• Part 5.2: Strategy, performance and reporting (Principles opcos 4 – 5): Tax transparency In 2020 we configured and embarked on the use of a When publishing the Integrated Report every year, we robotics process automation (RPA) to streamline some of also publish a separate tax report. In this tax report we our tax processes and alleviate manual interventions and include detailed information about the MTN Group’s total to provide more accurate data for use in tax returns tax contribution, on which we have obtained limited preparation at our South African head office companies. assurance from an independent external assurance This resulted in 80% reduction of effort applied in these provider since 2016. processes and minimising the risk of losing revenues in We prepared and submitted our 2019 country-by- terms of penalties, interests or inaccurate tax payments. country report to the South African Revenue Service. Assessment is underway to consider extending RPA across all our opcos. Refer to ‘tax technology improvement across MTN opcos’ section regarding the tax technology review and Full configuration of a tax system to further enhance our implementation progress as a drive to improve our transfer pricing and country-by-country reporting and full performance, reporting and transparency. implementation of the tax provisioning system is ongoing. It was slowed down due to budget cuts as a result of •• Part 5.4: Governance functional areas (Principles 11 – 13 COVID-19. and 15): Tax function and tax risk framework consideration Independent assurance review of Group total tax contribution (TTC) number The tax function is adequately resourced. As part of our drive and commitment to improving transparency and to increase the credibility of our total tax In 2019 we updated our Group tax strategy and policy contribution number, we engaged PwC to perform a limited and had them reviewed and approved at the Group Audit assurance review of our total group TTC number in Committee (and by the Group Board of Directors). We accordance with International Standard on Assurance also had these updated approved Group tax strategy and Engagements (ISAE) 3000 (Revised): Assurance policy documents rolled out and adopted by our operating Engagements other than Audits and Reviews of Historical companies across the MTN Group. Our tax strategy and Financial Information, issued by the International Auditing policy stipulate MTN’s organisational risk appetite and and Assurance Standards Board. The assurance to this risk level tolerance. As advised by the Group Audit number has been marked throughout the report. For Committee, we have recently started the review of the details of the scope of work, procedures and outcome of Group tax strategy and policy to ensure continued the review of the total Group TTC number, please refer to relevance in terms of tax governance and tax risk the independent assurance report on non-financial data management. In 2021 we will finalise the review and on our website www.mtn.com. updating of our Group tax strategy and policy and have them rolled out and adopted by our operating companies Adoption of King IV Code on Corporate Governance™ across the MTN Group. for South Africa, 2016 (King IV IV™10) principles Some of the main objectives of King IVTM are to: The tax risk management framework is stipulated within the group tax strategy and policy. •• Promote corporate governance as integral to running an organisation and delivering governance outcomes such In line with the tax strategy and policy, tax risk registers as an ethical culture, good performance, effective control are updated regularly and reported to the audit and legitimacy. committees on a quarterly basis. •• Reinforce corporate governance as a holistic and interrelated set of arrangements to be understood and •• Part 5.5: Stakeholder relationships (Principle 16): Tax implemented in an integrated manner. stakeholder relationships • • Encourage transparent and meaningful reporting to Our tax policy details guidance on how we should relate stakeholders. with our stakeholders to ensure a harmonious • • Present corporate governance as concerned with not relationship that balances the needs, interests and only structure and process, but also with an ethical expectations of our stakeholders and the best interest of consciousness and conduct. MTN. This is also aligned with our stakeholder King IV™’s fundamental concept regarding tax is that: engagement policy. •• The governing body should be responsible for a tax Total tax contribution and effective tax rates policy that is compliant with the applicable laws, but that The total tax contribution represents payments made by is also congruent with responsible corporate citizenship the MTN Group (including the MTN proportionate share of and that takes account of reputational repercussions. joint ventures and associates) to all spheres of governments King IVTM defines the governing body as among others, the within the regions in which we operate. The amounts board of directors of a company. From a tax perspective in represent actual cash payments made in the respective 2020, we continued to adhere to the King IVTM principles as financial year, rather than the tax charge as reported in the follows: income statement. •• Part 5.1: Leadership, ethics and corporate citizenship (Principles 1 – 3): Tax governance considerations With the help of internal auditors, the Group Audit Committee monitors adherence to the tax strategy and policy on a regular basis. A report on these audits is presented to the Group Audit Committee.
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MTN Group Limited Tax report for the year ended 31 December 2020 8 01 Tax report Continuous improvement on tax governance and transparency continued
11 Total value: R35,1bn (2019: R30,5bn) – 15,1% increase LA Total tax contribution by 2020 2019 opco region (Rbn) % % 40 South Africa 13,0 15,1 35 Nigeria 20,4 22,0 30 SEAGHA12 31,8 30,5 25 20 WECA13 24,4 21,9 15 14 MENA 10,4 10,5 10 100,0 100,0 5
11 0 The R35,1bn total Group TTC number was independently assured. Please 2020 2019 refer to the integrated report link in our website www.mtn.com for the independent assurance report by PwC. ■ South Africa 2020: R4,56 billion (13,0%) 2019: R4,61 billion (15,1%) 12 SEAGHA region: Uganda, Ghana, Rwanda, Zambia, South Sudan, MTN ■ proportionate share in eSwatini and Botswana. Nigeria 2020: R7,10 billion (20,4%) 2019: R6,69 billion (22,0%) 13 WECA region: Cameroon, Côte d’Ivoire,, Benin, Guinea-Conakry, Congo- ■ SEAGHA 2020: R11,19 billion (31,8%) 2019: R9,35 billion (30,5%) Brazzaville, Liberia and Guinea-Bissau. 14 MENA region: Syria, Sudan, Yemen, Afghanistan and MTN proportionate ■ WECA 2020: R8,57 billion (24,4%) 2019: R6,68 billion (21,9%) share in Iran. LA Limited assurance obtained. ■ MENA 2020: R3,65 billion (10,4%) 2019: R3,20 billion (10,5%)
Total tax contribution by country and region This table reflects the total of all tax amounts and government levies paid in respect of the 2020 and 2019 financial years classified by opco country and regions. Total tax contribution by country and region: 2020 2019 2020 2019 Proportionate Proportionate Proportionate Proportionate contribution contribution TTC TTC Rm Rm % %
South Africa 4 559 4 614 13,00 15,11 Nigeria 7 100 6 690 20,25 21,91 Uganda 3 001 2 562 8,56 8,39 Rwanda 813 687 2,32 2,25 Zambia 517 615 1,47 2,01 South Sudan 424 217 1,21 0,71 Botswana (joint venture) 145 100 0,41 0,33 Swaziland (joint venture) 91 69 0,26 0,23 Ghana 6 195 5 102 17,67 16,71 Total SEAGHA 11 186 9 353 31,90 30,63 Cameroon 2 037 1 550 5,81 5,07 Côte d’Ivoire 2 279 2 121 6,50 6,95 Benin 2 007 1 350 5,72 4,42 Guinea-Conakry 442 385 1,26 1,26 Congo-Brazzaville 1 432 959 4,09 3,14 Liberia 242 187 0,69 0,61 Guinea-Bissau 131 128 0,37 0,42 Total WECA 8 570 6 679 24,44 21,87 Iran (joint venture) 864 1 355 2,46 4,44 Syria 0 1 0 0 Sudan 1 008 513 2,88 1,68 Yemen 1 137 696 3,24 2,28 Afghanistan 640 636 1,83 2,08 Total MENA 3 649 3 200 10,41 10,48 Total contribution 35 064 30 536 100,00 100,00
MTN Group Limited Tax report for the year ended 31 December 2020 9 01 Tax report Continuous improvement on tax governance and transparency continued
Total tax contribution collected Total tax contribution borne by MTN (Rbn) by MTN (Rbn)
3,0 35 2,5 30 25 2,0 20 1,5 15 1,0 10 5 5 0 0 2020 2019 2020 2019
■ Product taxes 2020: R0,4 billion (15,8%) 2019: R0,4 billion (13,2%) ■ Corporate tax 2020: R6,9 billion (21,1%) 2019: R7,0 billion (25,0%)
■ Payroll taxes 2020: R1,9 billion (79,9%) 2019: R1,8 billion (68,6%) ■ Education tax 2020: R0,3 billion (1,1%) 2019: R0,3 billion (1,0%)
■ Dividend tax 2020: R0,1 billion (4,3%) 2019: R0,5 billion (18,3%) ■ Indirect taxes 2020: R18,2 billion (55,9%) 2019: R15,2 billion (54,4%)
■ Payroll taxes 2020: R0,5 billion (1,4%) 2019: R0,5 billion (1,6%)
■ Operating licences fees 2020: R2,7 billion (8,3%) 2019: R1,9 billion (7,0%)
■ Other 2020: R3,6 billion (11,1%) 2019: R2,8 billion (9,9%)
■ Property rates 2020: R0,0 (0,0% ) 2019: R0,0 (0,0%)
■ Dividend tax 2020: R0,4 billion (1,1%) 2019: R0,3 billion (1,1%)
■ Withholdings tax 2020: R0,0 (0,0%) 2019: R0,0 (0,0%)
MTN Group Limited Tax report for the year ended 31 December 2020 10 01 Tax report Continuous improvement on tax governance and transparency continued
Group effective tax rate (GETR) reconciliations
2020 2019 Consolidated Group % % Comment MTN Group 32,45 38,9515 This is GETR as reported on the Annual Financial Statements. Please refer below for the breakdown and comments. MTN Group 36,97 40,89 This is normalised GETR. Please refer below for the breakdown.
Reported Group effective tax rate reconciliation
2020 2019 % % Comment
Reported Group effective 32,45 38,95 Lower rate in 2020 mainly due to the non-taxable gain from tax rate the sale of Ghana and Uganda Tower InterCo BV. Main reconciling items: Other 4,4216 0,6817 Sudan non-deductible (4,38) (2,30) Turnover tax applied with result that bulk of operational expenses expenses and loss not allowable for tax purposes, ie a tax at 7% of (turnover and other income) less: (interconnect, roaming and transmission costs, and commission and discounts). Higher impact in GETR because of higher expense in 2020 (R4,55bn gross amount and R1,46bn in 2019). Non-taxable gain from sale 5,90 1,85 In 2020 this related to a gain on sale of Ghana and Uganda of Ghana and Uganda Tower Tower InterCo BV (2019 this related to a gain realised on InterCo BV/(from Jumia dilution of Jumia). dilution and sale of Amadeus and TravelStart) Nigeria regulatory fine and _ (0,31) This item includes unwinding interest on the Nigeria fine related expenses liability and the amortisation of fees related to the listing of MTN Nigeria. Lower impact to GETR due to lower Nigeria fine unwinding expenses in 2020 (Rnil) compared to 2019 (R0,20bn). Impairment loss on (1,45) _ remeasurement of non- current assets held for sale Foreign income and (4,89) (5,97) Higher withholding tax value in 2020 (R1,42bn) compared to withholding taxes 2019 (R1,06bn). Impairment of goodwill and (1,03) _ investment in joint ventures Assessed loss and other (1,91) (2,91) This relates to unrecognised deferred tax credits on assessed timing differences on which losses and other timing differences mainly in Business deferred tax credit was not Solutions Group, South Sudan, Guinea-Conakry, Liberia, recognised Netherlands and Smartvillage due to not meeting requirements of IAS 12 for recognition of a deferred tax asset. Disallowed interest expenses (1,11)18 (1,99) Standard effective tax rate 28,00 28,00
15 Restated for change in accounting policy, refer to note 11 for details of restatements. 16 This mainly consists of: Share of losses from MTN joint ventures and associates (+1,10%); Nigeria investment allowances relief/Cameroon reinvestment allowance (+0,77%); foreign tax rate adjustment to RSA standard rate (+6,20%); Nigeria education tax (-1,35%); Ghana special levy (-5%) of IFRS PBT (-0,97%); other non- deductible expenses (-1,45%); section 9D imputation (net income of controlled foreign companies (-0,45%); prior year deferred and current tax audit adjustment (-0,30%); additional minimum tax (mainly from Cameroon, Liberia, Guinea-Bissau, Syria and Guinea-Conakry) (-0,24%) and other miscellaneous (+1,11%). 17 This mainly consists of: Share of losses from MTN joint ventures and associates (+1,11%); Nigeria investment allowances relief/Cameroon reinvestment allowance (+1,32%); foreign tax rate adjustment to RSA standard rate (+4,41%); Nigeria education tax (-2,02%); Ghana special levy (-5%) of IFRS PBT (-1,08%); other non- deductible expenses (-1,81%); section 9D imputation (net income of controlled foreign companies (-0,45%); prior year deferred tax audit adjustment (-0,90%); additional minimum tax (mainly from Cameroon, Liberia, Guinea-Bissau, Syria and Guinea-Conakry) (-1,06%) and other miscellaneous (+1,16%). 18 This mainly relates to non-deductible interest expense incurred in MTN Holdings (Proprietary) Limited and MTN Mauritius Limited (two of the Group’s holding companies).
MTN Group Limited Tax report for the year ended 31 December 2020 11 01 Tax report Continuous improvement on tax governance and transparency continued
Normalised group effective tax rate reconciliation
Restated 2020 2019 % % Comment
Normalised Group effective 36,97 40,89 This is GETR as reported on the Annual Financial Statements. tax rate:19 Please refer below for the breakdown and comments. Main reconciling items: Other 5,0220 0,9421 This is normalised GETR. Please refer below for the breakdown. Sudan non-deductible (4,99) (2,42) Turnover tax applied with result that bulk of operational expenses expenses and loss not allowable for tax purposes, ie a tax at 7% of (turnover and other income) less: (interconnect, roaming and transmission costs, and commission and discounts). Higher impact in GETR because of higher expense in 2020 (R4,55bn gross amount and R1,46bn in 2019). Non-taxable gain from sale – – Since this was a once-off transaction, we have removed it for of Ghana and Uganda Tower normalisation of GETR. InterCo BV/(from Jumia dilution and sale of Amadeus and TravelStart) Impairment loss on – – Since this was a once-off transaction, we have removed it for remeasurement of non- normalisation of GETR. current assets held for sale Impairment of goodwill and – – Since this was a once-off transaction, we have removed it for investment in joint ventures normalisation of GETR. Nigeria regulatory fine and – – Since this was a once-off transaction, we have removed it for related expenses normalisation of GETR. Foreign income and (5,56) (6,27) Higher withholding tax value. In 2020 (R1,42bn) compared to withholding taxes 2019 (R1,06bn). Assessed loss and other (2,18) (3,05) This relates to unrecognised deferred tax credits on assessed timing differences on which losses and other timing differences mainly in Business deferred tax credit was not Solutions Group, South Sudan, Guinea-Conakry, Liberia, recognised Netherlands and Smartvillage due to not meeting requirements of IAS 12 for recognition of a deferred tax asset. Disallowed interest expenses (1,26)22 (2,09) Standard effective tax rate 28,00 28,00
19 Normalised Group effective tax rate is calculated by dividing the Group reported tax by adjusted Group profit before tax. 20 This mainly consists of: Share of losses from MTN joint ventures and associates (+1,25%); Nigeria investment allowances relief/Cameroon reinvestment allowance (+0,88%); foreign tax rate adjustment to RSA standard rate (+6,25%); Nigeria education tax (-1,54%); Ghana special levy (-5%) of IFRS PBT (-1,10%); other non- deductible expenses (-1,65%); section 9D imputation (net income of controlled foreign companies) (-0,51%); prior year deferred and current tax audit adjustment (-0,35%); additional minimum tax (mainly from Cameroon, Liberia, Guinea-Bissau, Syria and Guinea-Conakry) (-0,27%) and other miscellaneous (+2,06%). 21 This mainly consists of: Share of losses from MTN joint ventures and associates (+1,17%); Nigeria investment allowances relief/Cameroon reinvestment allowance (+1,39%); foreign tax rate adjustment to RSA standard rate (+4,63%); Nigeria education tax (-2,12%); Ghana special levy (-5%) of IFRS PBT (-1,14%); other non- deductible expenses (-1,90%); section 9D imputation (net income of controlled foreign companies) (-0,48%); prior year deferred tax audit adjustment (-0,95%); additional minimum tax (mainly from Cameroon, Liberia, Guinea-Bissau, Syria and Guinea-Conakry) (-1,11%) and other miscellaneous (+1,45%). 22 This mainly relates to non-deductible interest expense incurred in MTN Holdings (Proprietary) Limited and MTN Mauritius Limited (two of the Group’s holding companies).
MTN Group Limited Tax report for the year ended 31 December 2020 12 01 Tax report Continuous improvement on tax governance and transparency continued
Effective tax rates and standard corporate income tax rates by opco country 2020 2020 standard standard corporate corporate 2020 income tax 2019 income tax GETR24 rates25 GETR26 rates % % % %
South Africa23 35,90 28,00 30,54 28,00 Nigeria 31,50 30,00 30,31 30,00 Ghana 29,30 25,00 30,14 25,00 Uganda 30,01 30,00 29,00 30,00 Rwanda 35,20 30,00 44,93 30,00 Zambia 41,46 40,00 36,01 40,00 South Sudan –27 20,00 – 20,00 Botswana (joint venture) 23,48 22,00 35,26 22,00 eSwatini (joint venture) 29,09 30,00 29,67 30,00 Cameroon 108,8028 33,00 (32,82) 33,00 Côte d’Ivoire 24,80 30,00 21,25 30,00 Benin 99,4329 30,00 42,15 30,00 Guinea-Conakry (0,11)30 35,00 (7,31) 35,00 Congo-Brazzaville 23,62 22,5 26,15 22,5 Liberia (10,22)31 25,00 (4,60) 25,00 Guinea-Bissau (19,95)32 25,00 (29,62) 25,00 Iran (joint venture) (25,02)33 25,00 27,15 25,00 Syria 1,8234 14,00 12,27 14,00 Sudan 37,05 7,00 39,38 7,00 Yemen 41,07 50,00 74,49 50,00 Afghanistan 15,97 20,00 20,19 20,00
23 This is MTN South Africa opco Group of companies. 24 These are all based on ZAR currency converted profit before tax and income tax expenses and are for the Group in the applicable countries. 25 These are standard corporate income tax rates at the respective jurisdictions where our opcos operate. They are in line with their in-country income tax legislations. 26 These are all based on ZAR currency converted profit before tax and income tax expenses and are for the Group in the applicable countries. 27 MTN South Sudan made a tax loss. The deferred tax credit on assessed losses and other temporary differences was not recognised due to requirements of IAS 12 of the International Financial Reporting Standards not being met. 28 MTN Cameroon levied tax due to minimum alternative tax rules in-country and higher non-deductible expenses. 29 MTN Benin had higher non-deductible expenses. 30 MTN Guinea-Conakry had an accounting loss but still levied a minimum tax. The deferred tax credit on assessed losses and other temporary differences was not recognised due to requirements of IAS 12 of the International Financial Reporting Standards not being met. 31 MTN Liberia had an accounting loss but still levied a minimum tax. The deferred tax credit on assessed losses and other temporary differences was not recognised due to requirements of IAS 12 of the International Financial Reporting Standards not being met. 32 MTN Guinea-Bissau had an accounting loss but still levied a minimum tax. The deferred tax credit on assessed losses and other temporary differences was not recognised due to requirements of IAS 12 of the International Financial Reporting Standards not being met. 33 MTN Iran’s negative effective tax rate reconciliation as a result of hyper-inflation adjustments. 34 MTN Syria had an assessed loss and claimed the deferred tax credit.
MTN Group Limited Tax report for the year ended 31 December 2020 13 www.mtn.com
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