Tax Policy

The purpose of Varma’s Tax Policy is to define the Varma Group’s (Varma) tax strategy and principles according to which tax matters are managed within the Group. Every Varma employee whose job description includes tax matters must comply with this policy. The Tax Policy covers all direct and indirect taxes, both in Finland and abroad, related to Varma’s operations. Some examples of such taxes are the company’s corporate income tax, capital gains tax, tax at source, VAT, property tax and transfer tax, withholding tax on salary or pension, tax at source, and social security contributions.

Tax strategy

Varma’s mission is to implement statutory earnings-related pension provision. Carrying out this task requires that Varma invests pension assets profitably and securely. Our principle is to avoid double taxation on investment returns. Double taxation would lead to a lower return on investments and therefore contradict the ultimate objective of the investment operations and create pressure to raise pension contributions. Avoiding double taxation is also a basic principle of international tax regulation. In terms of our earnings-related pension system, it is important that capital gains and dividend and interest income obtained from abroad can be used to the fullest extent possible to cover statutory earnings-related pension security in Finland.

Varma is committed to acting in compliance with tax laws and regulations and rejects actions that, instead of business targets, aim to secure tax advantages contrary to the intention of the legislature. Varma does not engage in aggressive tax planning, nor does it partake in investment structures whose purpose is to avoid reporting obligations or make the beneficial owner of the income unidentifiable.

Varma closely monitors, e.g. the EU list of non-cooperative jurisdictions (i.e. the EU’s blacklist), and Varma does not invest in countries that are on the list or in investees situated in low tax rate countries for tax reasons. Our task is to invest pension assets profitably and securely. Considering the scope of Varma’s investment operations, this means that investments are made through larger and known funds which may also be situated in low tax rate countries. We do not make this choice for tax reasons, but instead for the options that are offered internationally to institutional investors. Varma’s approach is also that the tax domicile of the funds commits to an exchange of tax information between authorities. We also require that the fund management companies used by Varma take care of reporting and the payment of taxes in the countries in which business activities are pursued. International tax regulation and automatic exchange of information provide governments with better conditions for collecting taxes. In its investments, Varma complies with the tax laws and international tax rules of the investment country in question. In the absence of clear guidance by tax laws or rules, Varma’s leading principles are prudence and tax transparency.

Varma closely monitors changes in international tax regulation, as well as the development of standards and recommendations related to tax sustainability reporting. International tax development projects, such as the OECD’s Base Erosion and Profit Shifting (BEPS) project, combats tax avoidance and increases transparency and the automatic exchange of information in taxation. These provide governments with better conditions for collecting corporate taxes. Various standards and recommendations related to tax sustainability reporting, such as the Global Reporting Initiative (GRI) and Principles for Responsible Investment (PRI), support the development of sustainable tax reporting practices. Varma supports projects that aim to promote both international tax regulation and global reporting standards and also encourages its investee companies to comply with such regulations in their own operations.

Approval and ownership of the tax policy

The tax policy is approved and owned by Varma’s Board of Directors. The tax policy is reassessed annually. The Audit Committee is responsible for the assessment and proposes any necessary changes to Varma’s Board of Directors. Varma’s Chief Financial Officer (CFO) oversees the implementation of the tax policy and proposes any necessary changes to the Audit Committee.

Management of taxes

Varma’s taxes are the responsibility of the CFO, and the operative management of tax matters is handled by the financial administration. In terms of certain taxes and operations, responsibility has been delegated. Varma’s financial administration co-ordinates and assists other functions in managing tax matters as needed.

Managing statutory tax-related matters

Varma is committed to complying with the tax laws and regulations that are in effect. In terms of taxes, this means that we comply with all tax laws and regulations that apply to corporate operations. We pay statutory taxes in the correct amount and on time. We submit tax notifications to the authorities on time and offer to review them orally with the tax authority if necessary. In matters that are unclear or subject to interpretation, we apply for a preliminary ruling from the tax authority if necessary. Possible errors in the management of statutory tax-related matters are rectified and reported to the tax authority as quickly as possible once they are discovered. Correspondingly, Varma seeks rectification of incorrect tax decisions or tax paid by Varma on its own initiative or a refund of tax unduly withheld at source from Varma’s income as soon as possible once the matter is discovered.

Co-operation with tax authorities

Varma operates openly, responsibly and consistently with the tax administration and tax authorities. We make sure that the tax authorities have sufficient information on Varma’s operations and facts related to taxation so that they can base their decisions on correct and sufficient information. Our goal is to avoid tax conflicts and to resolve matters that are unclear and subject to interpretation through prior discussions, a preliminary ruling procedure or otherwise in proactive co-operation with the tax authorities.


Varma’s taxes are the responsibility of Varma’s CFO. With respect to certain taxes and operations, this responsibility has been delegated in line with the internal guidelines.

Management of tax risks

According to the Finnish tax legislation currently in force, institutions engaging in statutory earnings-related insurance operations can deduct a provision based on future pension liabilities from their taxes, which means they do not usually have taxable income. This principle benefits pension recipients, since taxes paid on investment returns reduce the amount of assets available to fund earnings-related pensions and thus increase the need to raise pension contributions. Following the same principle, Varma strives to arrange its investment operations such that the pension assets under its management are not subject to an unnecessary income tax burden.

A. Varma’s tax risks may be linked to either investment-related taxes or other tax matters. The most important risk indicators stemming from taxation related to investment operations are:

1. Risk affecting an investment’s return

  • The investment return level is lower due to taxes

2. Risk related to the investment structure

  • Legislative amendments
  • Matters related to Varma’s tax status (e.g. issues related to the permanent establishment)
  • Management of statutory tax matters related to investments (a reporting obligation abroad that Varma is subject to or a foreign tax obligation that extends to Finland)

3. Risk affecting the tax sustainability of investments

  • Publicity

Taxation-related issues and risks are analysed before an investment decision is made. Examining tax matters related to investments and identifying tax risks are part of the investment decision process, which is the responsibility of the investment function. If the tax matters related to investments are not examined, the investment cannot be made. The tax risks of an investment must be identified and taken into account when making the investment decision. No separate risk indicators or limits have been defined for tax risks.

B. Varma’s other risk indicators related to taxation are:

1. Risks affecting the amount of Varma’s taxes:

  • Unclear tax issues
  • Tax implications arising from a controlled foreign company (CFC)
  • Tax at source

2. Risks related to managing Varma’s statutory tax-related matters:

  • An additional cost arising from hidden VAT
  • Administrative expenses
  • Sanctions

3. Reputation risk:

  • Publicity
  • Customer demands

Separate euro-denominated limits on tax risks have not been defined.

The risk related to tax structures is managed at Varma by actively monitoring the development and practices of international tax legislation with the help of external experts. Publicity is managed by means of open dialogue with Varma’s various stakeholders.


In order to manage tax risks, Varma has defined specific indicators that are monitored regularly. The controls are described in Varma’s internal guidelines.

Purchase of tax advisory services

Varma’s financial administration co-ordinates the use of tax advisory services. When necessary, Varma relies on the help of experts to manage tax matters. We have chosen specific service providers for specific tax matters, and these choices are assessed regularly.

As a basic principle, Varma does not apply success fees in tax advisory services. For exceptional projects and success fees, the use of tax advisory services and the choice of service provider are decided by the CFO. The CFO approves the tax advisory services purchased from the audit firm that carries out Varma’s statutory audit in accordance with the guidelines and euro-denominated limits set by the Board’s Audit Committee.

Representation in taxation-related matters

Varma’s mission is to implement statutory earnings-related pension provision. In order to implement this mission, Varma participates in the social debate concerning pension companies and in tax legislation work, e.g. through Finance Finland and the Finnish Pension Alliance TELA. Representation in tax-related issues at Varma is handled by the President and CEO, under the authority of Varma’s Board of Directors and with the assistance of the CFO.

Responsibility in tax matters

Varma’s core task, implementing statutory pension provision, is a significant social mandate that highlights the careful management of pension assets and requires a high level of ethics and transparency. In our operations, we comply with the laws and official regulations that are in effect. Varma’s Code of Conduct complements the laws and regulations that must be complied with. In line with the Code, we do not tolerate unethical operations in taxation.

For responsibility issues, Varma has a whistleblower channel through which every Varma employee or outside party can anonymously report observed potential misconduct. The whistleblower channel is also in use for tax-related issues.