Risk concerning the legal environment

Tools

Level of risk

low
medium
high

Change in the level of risk compared to 2017:

decrease
unchanged
increase

RISK CONCERNING THE LEGAL ENVIRONMENT
RISK ASSOCIATED WITH TAXES	The Group is exposed to the risk of non-compliance with the provisions of the tax law in relation to Corporate Income Tax or incorrect interpretation of the law. Since provisions of the tax act are unclear, the interpretations and judgments issued in respect to corporate income tax is often inconsistent. This causes difficulties with the tax qualification of economic events. Current control activities include updates of the internal tax procedures to address the changing regulations and training of employees handling CIT, and ongoing monitoring of controls implemented to revise them as needed. Analysis of changes in income tax regulations in 2019 and in terms of reporting on MDR tax-planning schemes. The Group is also exposed to the risk of fines associated with incorrect calculation of VAT due to employee errors or system errors or due to differences in the interpretation of tax regulations, as well as due to a failure to comply with the requirements of the VAT regulations. As of January 2017, sanctions for improper VAT settlements (20%, 30%, 100%) were reinstated, as well as stricter fines were introduced under the Criminal Fiscal Code and the Criminal Code for issuing or using inaccurate invoices. In 2018, the Group also started handling invoice payments to business partners under the Split Payment system. Current controls include updates of tax procedures to address changing regulations, training of employees, ongoing monitoring of implemented controls, monitoring of changes due to the planned transition from the PKWiU system to the CN combined nomenclature system and the related revision of VAT rates.
COMPLIANCE RISK New risk	The risk is related to potential consequences of the Group’s failure to comply with legal regulations or its internal regulations and standards of conduct. It also means internal inconsistencies in regulations and procedures, which opens the possibility of applying them inconsistently. Due to the complexity of the legal and regulatory environment, as well as an extensive organizational structure, it is likely that inconsistencies in internal regulations will occur or from time to time they will not be compliant with the existing requirements. Actions taken to mitigate the risk include: procedure of oversight over legal and other requirements and oversight over documentation and provisions, Code of Ethics, JSW Group Code, Rules and Regulations for adopting internal regulations at JSW, Rules and Regulations for appointing teams, commissions and committees, Group’s Corporate Governance Principles.

RISK CONCERNING THE LEGAL ENVIRONMENT

RISK ASSOCIATED WITH TAXES

The Group is exposed to the risk of non-compliance with the provisions of the tax law in relation to Corporate Income Tax or incorrect interpretation of the law. Since provisions of the tax act are unclear, the interpretations and judgments issued in respect to corporate income tax is often inconsistent. This causes difficulties with the tax qualification of economic events.

Current control activities include updates of the internal tax procedures to address the changing regulations and training of employees handling CIT, and ongoing monitoring of controls implemented to revise them as needed. Analysis of changes in income tax regulations in 2019 and in terms of reporting on MDR tax-planning schemes.

The Group is also exposed to the risk of fines associated with incorrect calculation of VAT due to employee errors or system errors or due to differences in the interpretation of tax regulations, as well as due to a failure to comply with the requirements of the VAT regulations. As of January 2017, sanctions for improper VAT settlements (20%, 30%, 100%) were reinstated, as well as stricter fines were introduced under the Criminal Fiscal Code and the Criminal Code for issuing or using inaccurate invoices. In 2018, the Group also started handling invoice payments to business partners under the Split Payment system.

Current controls include updates of tax procedures to address changing regulations, training of employees, ongoing monitoring of implemented controls, monitoring of changes due to the planned transition from the PKWiU system to the CN combined nomenclature system and the related revision of VAT rates.

COMPLIANCE RISK

New risk

The risk is related to potential consequences of the Group’s failure to comply with legal regulations or its internal regulations and standards of conduct. It also means internal inconsistencies in regulations and procedures, which opens the possibility of applying them inconsistently. Due to the complexity of the legal and regulatory environment, as well as an extensive organizational structure, it is likely that inconsistencies in internal regulations will occur or from time to time they will not be compliant with the existing requirements.

Actions taken to mitigate the risk include: procedure of oversight over legal and other requirements and oversight over documentation and provisions, Code of Ethics, JSW Group Code, Rules and Regulations for adopting internal regulations at JSW, Rules and Regulations for appointing teams, commissions and committees, Group’s Corporate Governance Principles.

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Risk concerning the legal environment

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