Economic Contribution Report 1 Group Economic Contribution Report

2015 Economic Contribution Report 2

CONTENTS 03 Foreword by our CEO 04 Company profile 05 Employment generated 06 Total value added 07 Economic value generated 08 Total direct and indirect tax contribution

APPENDICES 10 Our tax policy 11 Tax charged in the financial statements 12 Independent assurance report 13 Tax contribution principles Economic Contribution Report 3 Foreword by our CEO This report provides insights into the full economic contribution of In this report, we provide information on why we decided to produce this report. the Carlsberg Group. our economic contribution to the societies We hope the report sheds further light on in which we operate. our total economic contribution, including our employment and growth contribution as The Carlsberg Group has well as our tax policy and tax contribution. operations in more than 40 countries in Western Europe, and The data provided on our wider economic Asia. In addition, we are present in more contribution are calculated by Regioplan based than 100 countries worldwide through on a well-recognised methodology. KPMG licence and export agreements. In all has issued assurance on selected information these markets, we create jobs, growth based on existing accounting regulations and and a range of government revenues. our own reporting, which is constantly under review to ensure that it reflects best practice OUR ECONOMIC CONTRIBUTION and regulatory developments. In 2015, the Group employed around 45,000 employees directly. An additional THE 410,000 jobs were created in related This report looks exclusively at the direct industries such as agriculture, hospitality and indirect economic contribution of the and retail as a consequence of the produc- Carlsberg Group. tion and sale of our products. Altogether, the production and sale of the Carlsberg In addition, our major shareholder, the Group’s products generated almost DKK Carlsberg Foundation, donated more than 105bn in total government revenues directly DKK 300m to art, culture and basic research and through related industries. within the fields of natural science, the humanities and social science in 2015. We will continue to develop our business in a way that benefits the Carlsberg Group FEEDBACK as well as the societies and economies upon We hope that the information provided will which we depend for future growth. be helpful to stakeholders who wish to gain an enhanced understanding of the wider We recognise that there is a growing interest economic contribution of the Carlsberg in the economic contribution of international Group, and we welcome feedback on the Cees ’t Hart companies, which is part of the reason report to help us improve our disclosure. President & CEO, Carlsberg Group Economic Contribution Report 4 Company profile The Carlsberg Group, headquartered in , , is a global brewer with a presence in more than 150 markets around the world.

The core of our business is , accounting of our markets we hold strong positions. for approx. 85% of our total beverage We service the rest of the world through volume. We have around 140 brands in our export or licence agreements. global portfolio. The Carlsberg Group employs around PORTFOLIO AND GEOGRAPHY 45,000 people directly and, taking into Three fourths of our beer volumes are account jobs generated indirectly in made up of our local power brands, such related industries such as agriculture and as Kronenbourg in , Kasztelan in hospitality, the Group generates jobs for , Baltika in , in 455,000 people in total. and in . Alongside these, we have a strong portfolio of international The Carlsberg Group provides significant employment in premium brands ‒ Carlsberg, Tuborg, 1664 other industries, such as the and Grimbergen ‒ that deliver approx. 25% BEER VOLUMES OPERATING hospitality sector. of our total beer volumes. PROFIT Western Europe Eastern Europe In addition to beer, in selected markets Asia we have a portfolio of soft drinks, water, cider and other beverages. Although still 31% 28% small on a global scale, cider is a rapidly 42% growing category in our beverage portfolio. Somersby, our international cider brand, 53% is the world’s fastest growing international cider brand and available in 51 markets around the world. 19%

Our business is centred in Western Europe, 27% Eastern Europe and Asia, and in the majority Economic Contribution Report 5

1 Carlsberg Group employee Employment creates an additional 9 generated jobs in related industries. In total, 455,000 jobs are created by the DIRECT EMPLOYMENT Group, an additional nine jobs are created Carlsberg Group. In 2015, the Carlsberg Group directly in related industries. employed around 45,000 people1. The majority of our employees work at our COMMUNITY ENGAGEMENT production sites, which are often located J.C. Jacobsen, the founder of Carlsberg, in less populated local areas. We also built his company on the passionate and Distribution of employment employ a highly skilled workforce in dedicated belief that the prosperity of areas such as sales & marketing, finance, Carlsberg was conditional on engaging with production, procurement and logistics. and giving back to society. That heritage guides our values and actions today, and TOTAL EMPLOYMENT GENERATED the legacy is kept alive through hundreds In addition to the employees directly of local community engagement activities employed by the Carlsberg Group, the across the markets in which we operate Group also generates employment in majority-owned companies. related industries in connection with the production and sale of our products. The employees of the Carlsberg Group all over the world make great efforts to The indirect contribution to employment is integrate our CSR policies and initiatives Retail 15% Suppliers incl. generated through suppliers in areas such as into their local communities. agriculture, packaging and logistics as well agriculture 33% as induced employment in the hospitality In 2015, our majority-owned companies and retail sectors. It is estimated that the invested DKK 38m within their local total indirect and induced employment communities, including in-kind donations created by the Carlsberg Group in 2015 such as free products to support charity amounted to approx. 410,000 employees. events, direct financial contributions and cause-related marketing activities. Including the people directly employed by the Carlsberg Group, more than 455,000 Across the Group, we had 816 community people are employed due to the production engagement activities in 2015. 6395 and sale of the Carlsberg Group’s products. employees spend more than 25,000 For every person employed by the Carlsberg hours on volunteering projects supporting local communities (cf. Carlsberg Group Hospitality 42% Carlsberg Group 10% 1 Year-end headcount in majority-owned businesses. Sustainability Report 2015). Economic Contribution Report 6 Total value added Significant value is generated by the production and consumption of the Carlsberg Group’s products

In general terms, value added is the TOTAL VALUE ADDED (DKK) difference between the market value of the final product and the purchasing value of the goods and services acquired for its production. 78.2bn

Calculated by Regioplan using a well- recognised methodology, the value added by the production and sale of the Carlsberg Group’s products in 2015 totalled more 15% than DKK 78bn in our markets.

Our production and sales facilities, as well as suppliers, hospitality and retail outlets, add value to the final product that is sold to 42% consumers all over the world.

The Carlsberg Group has a Value added pays companies’ tax liabilities diverse portfolio of markets in and employees’ wages, and rewards lenders Asia and the region accounts for and entrepreneurs for their investments. 31% of Group beer volumes. For the governments in the countries in which we operate, value added is the source 33% of their VAT revenues. Retail Hospitality Suppliers (including agriculture) 10% Carlsberg Economic Contribution Report 7 Economic contribution

The economic value generated includes ECONOMIC VALUE GENERATED (DKK) gross revenue, other income, financial income and income included in special items. Our contribution is distributed among our stakeholders – as operating costs to our 92.6bn suppliers, as wages etc. to our employees, as financial expenses to our providers of capital and as taxes to governments. The economic value retained is the profit used to finance dividends for our shareholders and the future growth of our business.

In 2015, directly generated economic value in the countries in which we operate totalled Operating costs DKK 92.6bn. The contributions in the six 49.4% DKK 45.8bn main areas are shown in the figure. Special items TAXES BORNE 9.5% DKK 8.8bn The Carlsberg Group’s taxes borne in 2015 amounted to DKK 28.9bn, or almost one Employee wages third of the economic value generated. 10.5% DKK 9.7bn The vast majority of our taxes borne are indirect taxes incurred through excise Providers of capital duties (approx. 89%), while the remaining 2.2% DKK 2.0bn 11% is incurred through direct taxes such as environmental tax, corporate income tax and social security contributions for Taxes borne incl. excise duties employees. 31.2% DKK 28.9bn Taxes borne are further described on the following page. Economic value retained -2.8% DKK -2.6bn Economic Contribution Report 8 Total direct and indirect tax contribution

DIRECT TAX CONTRIBUTION TOTAL TAX CONTRIBUTION TOTAL GOVERNMENT In 2015, the Carlsberg Group’s total (DKK billion) REVENUES GENERATED (DKK) tax contribution, comprising both taxes 50 borne and taxes collected, amounted to DKK 38.6bn. 104.7bn The vast majority of our taxes borne are 8.8 38.6 indirect taxes incurred through excise 40 duties. The remaining taxes borne are direct taxes such as corporate income tax, 7.1 social security taxes and other taxes like 29.81 environmental tax etc. 30 1.7 1.4 2.1 In addition to the taxes borne, we also 0.7 collect taxes on behalf of governments,

for example employee taxes, VAT and 63% 20 other taxes. 37%

TOTAL GOVERNMENT REVENUES GENERATED 25.6 The production and sale of the Carlsberg Group’s products consequently generate sub- 10 stantial revenues for governments worldwide.

In addition to the total tax contribution by the Carlsberg Group, government revenues 0 are also generated in related industries such Taxes borne Taxes Total tax as agriculture, retail and hospitality. incl. duties collected contribution

Using a well recognised methodology, Excise duties Other Taxes Corporate income tax Total tax contribution Total tax contribution Regioplan estimates that in 2015 the Social security taxes Personal income taxes VAT by Carlsberg by suppliers, retail Carlsberg Group generated DKK 104.7bn and hospitality in total government revenues directly and 1The difference of DKK 0.9bn to taxes borne in “Economic Value Generated” through related industries. can be explained by periodic differences in taxes expensed and taxed paid. Economic Contribution Report 9 Appendices Economic Contribution Report 10 Our tax policy

INTRODUCTION POLICY Governance and accountability The Carlsberg Group We are fully aware that taxes constitute Compliance and transparency We ensure that the frameworks for handling sells its beer in more important contributions to society in the Compliance taxes are in place, and we continuously countries in which we do business. We We are determined to fulfil our global tax evaluate our processes and controls. than 150 markets and are also aware that there is an increased obligations, operating in full compliance we contribute positively focus on how we make decisions about with all local and international tax laws as Cooperation with governments tax, as well as on how much we pay well as OECD guidelines. and authorities to government revenues and where. Governments in those countries. Transparency We consider the tax laws in all of the A large proportion of the Carlsberg We recognise that there is a growing interest countries in which we operate to be equally Group’s tax payments are made up of in the level of taxes paid by multinational important. In this context, we also look for excise duties and direct taxes such as companies. We aim to be transparent on constructive dialogue with governments on environmental tax, real estate tax, non- this issue and to communicate in a clear and all aspects of taxation. recoverable VAT and social contributions timely manner about our tax policy, total tax from the Carlsberg Group and its contribution and tax payments. Relationship with tax authorities employees etc. We seek a good relationship with tax Structure and planning authorities and rely upon their support. In The foundation for our Tax Policy is We strive to have a competitive tax charge the course of conducting business globally, good corporate practice in the area of within the context of our commercial opera- disagreements with tax authorities may tax management and tax transparency, tions, while at the same time contributing to occur. The Carlsberg Group will actively balancing the interests of our various the society in which we do business. Any tax seek dialogue with tax authorities and, if stakeholders. The Tax Policy establishes planning we undertake is based on sound required, involve tax authorities in resolving the foundation for the way taxes are commercial rationale. any double taxation issues that may arise. managed by the Carlsberg Group. Implementation of the Tax Policy is Transfer pricing ensured by a set of guidelines and We pay close attention to transfer pricing procedures that apply to the Carlsberg requirements and aim to pay the appropriate Group companies and employees amount of tax according to where value is worldwide. created. All transfer pricing is calculated using arm’s length principle. Economic Contribution Report 11 Tax charged in the DKK million 2015 Deferred tax assets and deferred financial statement 2015 tax liabilities Deferred tax at 1 January, net 5,717 Adjustments to previous years 10 Acquisition of entities 19 Recognised in other comprehensive income -133 Recognised in the income statement -865 Change in tax rate 9 TAX CHARGED IN THE FINANCIAL The tax paid differs from the corporation that will occur in future periods. Deferred Foreign exchange adjustments -532 STATEMENTS tax charge in the income statement mainly tax assets and liabilities are measured at 4,232 In 2015, the Carlsberg Group reported an Deferred tax assets and liabilities as because of the timing of tax instalment tax rates that are substantively enacted at -5 held for sale excise tax charge of DKK 25.7bn (income payments. the reporting date. statement, page 59 of the consolidated Deferred tax at 31 December, net 4,227 financial statements) and a corporate tax EFFECTIVE TAX RATE FOR THE YEAR The Group had a net deferred tax liability Specified as follows charge of DKK 0.8bn (section 6 of the The tables show the reconciled corporate of DKK 4,227m in 2015. After offsetting Deferred tax liabilities 5,924 consolidated financial statements), giving income tax change to the nominal weighted balances within the same jurisdiction that Deferred tax assets -1,697 a total tax charge of DKK 26.5bn as part of tax rate for the Carlsberg Group of -21.4% are settled on a net basis, the amounts Deferred tax at 31 December, net 4,227 the taxes borne stated on page 7. for 2015. The nominal weighted tax rate presented in the balance sheet are liabilities for the Group is calculated as domestic tax of DKK 5,924m and assets of DKK 1,697m. CORPORATION TAX CHARGE (FINANCIAL rates applicable to profits in the entities as STATEMENTS DISCLOSURES) a proportion of each entity’s share of the Of the total deferred tax assets recognised, The corporate income tax for the year for DKK million 2015 Group’s profit before tax. the Carlsberg Group for 2015 was DKK DKK 911m related to tax loss carry- Reconciliation of the effective % DKK m 849m of which DKK 1,748m was current tax forwards, the utilisation of which depends tax rate for the year The effective tax rate for the Group is 49% charge expense and DKK 865m was a de- on future positive taxable income exceeding Profit before tax -1,733 for 2015, impacted by the impairment of ferred tax credit. The total corporate income the realised deferred tax liabilities. It is Nominal weighted tax rate intangible assets and property, plant and for the Carlsberg Group -21.4% -370 tax paid in 2015 was DKK 2,140m. management’s opinion that the tax loss equipment in Baltika , Eastern carry-forwards can be utilised. Change in tax rate 0.5% 9 Assets, Chongqing Brewery Group and Adjustments to tax for Carlsberg UK. previous years -2.5% -43 Non-capitalised tax assets, DEFERRED TAX (FINANCIAL net movements 18.9% 327 STATEMENTS DISCLOSURES) DKK million 2015 Non-taxable income 0.9% 15 Deferred tax represents the timing differ- Tax for the year can be specified Non-deductible expenses 13.8% 239 ences that can occur when items of income as follows Tax incentives etc. -4.6% -80 Current tax 1,748 or expense are included in the financial Special items 42.4% 734 Change in deferred tax during the year -865 statements in different periods to those in Withholding taxes 8.7% 151 Change in deferred tax from change in tax rate 9 which they are taxable or tax-deductible. Other and tax in associates Adjustments to tax for previous years -43 Deferred tax assets and liabilities represent and joint ventures -7.7% -133 Total 849 the tax effects of such timing differences Effective tax rate for the year 49.0% 849 Economic Contribution Report 12 Independent assurance report

TO THE READERS OF THE 2015 ECONOMIC We do not provide any assurance on the competences needed to provide assurance • Obtained representation letter signed CONTRIBUTION REPORT achievability of Carlsberg’s objectives, on sustainability information, and that by management and the responsible We were engaged by the Executive Board targets and expectations. they comply with the requirements of the employees. of Carlsberg A/S to provide assurance Code of Ethics for Professional Account- • We also read other information included on selected information in the Carlsberg Procedures performed to obtain a limited ants of the International Federation of in the report on Economic Contribution Group Economic Contribution Report level of assurance are aimed at determining Accountants to ensure their independence. Report 2015 that contains the selected 2015. Carlsberg A/S is responsible for the the plausibility of information and are less information and our report thereon in preparation of the report in accordance with extensive than those to obtain a reasonable WORK UNDERTAKEN order to identify material inconsistencies, the reporting criteria as specified in appendix level of assurance. Our procedures included the following: if any, with the selected information. Tax contribution principles including the • Reviewing the suitability of the reporting identification of material issues. Our REPORTING CRITERIA AND criteria. CONCLUSION responsibility is to issue an assurance report ASSURANCE STANDARD • Evaluating the design and implementa- Based on the procedures performed, as based on the engagement outlined below. Reporting criteria are specified in tion of the systems and processes for described above, nothing came to our atten- appendix Tax contribution principles on the collection, processing and control tion to indicate that the selected information SCOPE pages 13-14. It is important to view of the selected information. is not presented, in all material respects, in Our engagement was designed to obtain the assured information in the context • Inquiries to the relevant employees accordance with the reporting criteria. limited assurance on whether the following of these criteria. We believe that these at Carlsberg A/S responsibilities and information is presented, in all material criteria are suitable in view of the carrying out internal control procedures respects, in accordance with the reporting purpose of our assurance engagement. of the selected information. criteria: • Evaluating internal and external docu- • In the “Economic contribution” section, We conducted our engagement in accord- mentation, based on sampling, to the following information for 2015: Taxes ance with the International Standard for determine whether the selected tax borne incl. excise duties, corporate tax Assurance Engagements (ISAE) 3000: information is supported by sufficient paid and excise duty paid (page 7). Assurance Engagements other than Audits documentation and evidence. Copenhagen, 3 March 2016 • In the “Tax charged in the financial or Reviews of Historical Financial Informa- • An analytical review of the selected KPMG Statsautoriseret Revisionspartnerselskab statement 2015” section, the following tion, issued by the International Auditing tax information for the individual information for 2015 corporate taxes: and Assurance Standards Board. This consolidated entities. Total for corporate income tax charge, Standard requires, among other things, • Reconciliation of selected tax information effective tax rate and specification of that the assurance team possess the Mike Maloney Henrik O. Larsen with the audited consolidated financial Certified Public State Authorised deferred tax (page 11). specific knowledge,­ skills and professional statements of Carlsberg A/S. Accountant Public Accountant Economic Contribution Report 13

not reported, and taxes above DKK 50,000 Operating cost but below DKK 100,000 are reported as Includes cost of sales, sales and distribution Tax contribution DKK 50,000. expenses, administrative expenses, other operating expenses, expenses included in The data is reported by the entity in local special items, but excluding employee wages. principles currency in multiples of 1,000. Employee wages SCOPE OF REPORTING AND DEFINITION Include wages to employees excluding social OF KEY TERMS security costs. “Tax” in this Report means any amount of money required to be paid to, or collected Providers of capital and subsequently remitted to, a govern- Include financial expenses recognised in the Basis of Preparation Data is collected for all companies that ment. Taxes have been reported by differ- income statement, but not financial expenses Carlsberg A/S controls. Control is obtained entiating between taxes borne and taxes recognised in other comprehensive income. GENERAL COMMENTS when Carlsberg A/S directly or indirectly collected. The following sections provide the This Basis of Preparation presents the scope owns or controls more than 50% of the vot- scope of the data presented in the Report. Economic value retained and methodology of the collection and re- ing rights in the subsidiary or has control in Consolidated profit after tax. porting of the data on tax payments used in some other way. Subsidiaries that Carlsberg Terms defined in Carlsberg’s Annual Report the Carlsberg Group Economic Contribution controls have reported 100% of their taxes 2015 are not ­described below. Current tax Report (“the Report”). borne and collected, and the full amount is The corporate income tax due in respect included in the Carlsberg tax contribution. Taxes borne and taxes collected are the taxes of taxable profit for an accounting period, The Report aims to provide readers with due in respect of an accounting period as de- as defined in the International Financial an overview of the total tax contribution to Companies over which the Group exercises fined in the IFRS, as adopted by the EU. Borne Reporting Standard IAS 12. society that the Carlsberg Group (exclud- a significant influence, but does not control, taxes paid and collected taxes paid, including ing associates) has generated during the are considered to be associates. Significant excise duty paid, are included when cash is Deferred tax year. The total tax contribution is defined influence is generally obtained by direct or released from or received by Carlsberg. The corporate income tax due in respect of as taxes borne and taxes collected by the indirect ownership or control of more than temporary differences­ between accounting Carlsberg Group. 20% but less than 50% of the voting rights. KEY TERM DEFINITIONS values and tax base, as defined in the Data for associates is not part of the Carls- Economic value generated ­International Financial Reporting Standard The Basis of Preparation supports the data berg tax contribution. Economic value generated comprises gross IAS 12. for taxes borne, taxes collected and total revenue, other income, financial income tax contribution included in the Report. Entities acquired or formed during the year and income included in special items and are recognised in the Report from the date share of profit after tax in associates and It is the responsibility of the Management of acquisition or formation. Entities that are joint ventures. Income recognised in other of Carlsberg to ensure that appropriate pro- disposed of or wound up are recognised in comprehensive income is not included. cedures are in place to prepare reporting in the consolidated income statement until the line with this Basis of Preparation. date of disposal or winding-up. Total tax contribution Total tax contribution is the sum of borne All data, unless otherwise stated, is pre- The data includes a degree of estimation, and collected taxes paid to governments for pared for the year from 1 January 2015 as tax per entity is not reported in detail the period from 1 January to 31 December. to 31 December 2015. if a type of tax is below DKK 100,000 per Amounts are included as paid when cash is year. Instead, taxes below DKK 50,000 are released from or received by Carlsberg. Economic Contribution Report 14

Employee taxes Excise duties (beer and soft drinks etc.) Withholding taxes on dividends, 2. TAXES COLLECTED Include personal income taxes and social Excise duties are indirect taxes on the royalties, interest and ­professional fees These are taxes not finally borne by contribution for employees­ (borne and consumption or the use of certain products Withholding taxes comprise the final tax Carlsberg, but Carlsberg bears an collected). (e.g. alcoholic beverages or tobacco). In burden on payment of dividends, interest administrative burden for the collection contrast to value added tax (VAT), they etc. after possible tax relief. of taxes. These taxes are, however, Government are expressed as a monetary amount per indirectly generated from Carlsberg’s The term government means any gov- quantity of the product. Transportation taxes business activities and therefore part of ernment body or nation, state, region Transportation taxes comprise flight tax, Carlsberg’s total tax contribution. or district. Energy taxes (net, non-refundable) petrol tax, registration ­duties and other Energy taxes comprise environmental taxes levied on the mobility of goods and Personal income taxes Direct tax taxes levied on the consumption of energy employees. This comprises employee taxes withheld A tax paid directly to a government by borne by companies’ own supply of energy. from employee wages and paid to govern- the person on whom it is imposed. Such Such taxes may include taxes on the con- Social contribution for employees ments, i.e. tax collected and remitted to taxes also include non-refundable VAT, sumption of electricity, oil, gas or coal. Social contribution for employees compris- governments on behalf of employees. non-recoverable withholding taxes, real es the social security contributions levied estate tax etc. Environmental fees on and borne by the employing company. Social contribution withheld Environmental fees comprise additional Such contributions may include the em- by the company Indirect tax environmental taxes that may apply ployer’s national insurance contributions, This comprises social contributions payable A tax required to be paid to a government depending on company operations. Such employment insurance tax, employees’ by employees to social security, private by one person at the expense of another. taxes may include other taxes and duties provident fund, old-age, survivors’ and funded and unfunded schemes. Generally, on the supply of goods and services that disability insurance tax. the employment of staff requires the em- are potentially harmful to the environ- ploying company to administer employees’ Scope of reporting ment and have not been included in the Stamp duties social security contributions by deducting energy taxes. Stamp duties comprise taxes that arise these from wages and salaries. 1. BORNE TAXES AND EXCISE DUTIES on transfers of assets or capital. Typically, These are the taxes that Carlsberg is obliged VAT (non-deductible) these taxes would be reflected in stamp Withholding tax on dividend to pay to a government on its own behalf, This comprises the non-deductible part of duty returns made to governments and distributions made by Carlsberg A/S or taxes that Carlsberg is obliged to pay to the value added tax, i.e. taxes that arise tend to become payable, and are paid, This comprises taxes that are required a third party and that cannot be recovered in relation to brewing or sale, which can- to governments shortly after capital or to be withheld in advance on payments from a government. not be recovered from a government. The assets have been transferred. made to shareholders. payment is borne by the company and not Corporate income tax the consumers. Other taxes VAT Corporate income tax comprises any tax on This category comprises all paid taxes Value added tax, or VAT, is a broadly based the business calculated on the basis of its Real estate taxes which have not been included in the consumption tax assessed on the value profits, income or capital gains. Typically, Real estate taxes comprise any property- above categories. added to goods and services. It applies these taxes would be reflected in corporate related taxes, including property, land and more or less to all goods and services that income tax returns made to governments estate tax (other than stamp duty, which is are bought and sold for use or consumption and tend to become payable, and are paid, shown below). Typically, these taxes tend to in certain geographic areas. This comprises either in the year the profits were made or become payable, and are paid, to govern- the net VAT payable to a government, i.e. up to one year later, depending on the local ments throughout the year. VAT on sales minus VAT on purchases. tax rules as to timing of payments. Carlsberg A/S 100 1799 Copenhagen V Denmark

Phone +45 3327 3300 www.carlsberggroup.com

CVR No. 61056416