Tax Strategy

Scope

This strategy applies to the U.K. subgroup consisting of Fossil (UK) Holdings Limited and Fossil (UK) Ltd. (collectively “Fossil UK”) and to the group of companies headed by Fossil Group, Inc. (“Fossil” or “the Company”).  This document is intended to comply with paragraph 19 of Schedule 19 of the Finance Act 2016. It will undergo continuing review and will be updated annually.  It is effective for the financial year ending 31 December 2017.

Overview

Fossil UK is a limited company with operations in the United Kingdom and Ireland.  It is indirectly wholly owned by Fossil Group, Inc., a United States corporation which is publicly traded on the NASDAQ stock exchange.

The tax policies of Fossil UK mirror those of the larger Fossil Group.  Fossil is committed to conducting business ethically and in full compliance with the laws and regulations of the countries wherein it operates. 

Risk Management and Governance

It is the role of the Audit Committee of Fossil’s Board of Directors to assist the Board in fulfilling its oversight responsibility related to the Company’s compliance with legal and regulatory requirements and the Company’s monitoring and enforcement of its Code of Conduct and Ethics (the “Code”).

Fossil maintains internal policies and procedures to support its tax accruals and to ensure that tax payments are made in full and tax returns are timely submitted.   Fossil’s VP Tax and European Chief Financial Officer are ultimately responsible for Fossil’s overall tax risk while the management of the day to day U.K. tax governance is delegated to the Company’s European Shared Service Center and to the Fossil UK Financial Controller.

Tax Planning

Our Company’s reputation for honesty and integrity reflects the individual reputations of our directors, officers and employees.  To protect this reputation and to promote compliance with laws, rules and regulations, the Company’s Board of Directors has adopted a Code of Business Conduct and Ethics.  This Code sets out the basic standards of ethics and conduct to which all of our directors, officers and employees are held.  These standards are designed to deter wrongdoing and to promote honest and ethical conduct. This Code can be found at the following link:  https://www.fossilgroup.com/investors/corporate-governance/fossil-group-code-of-conduct-and-ethics/.

To this end, Fossil complies with all tax rules and regulations on a worldwide basis and only engages in tax planning that is aligned with commercial business activities.  The company will utilize tax incentives or opportunities to minimize tax where 1) these are consistent with the intended policy objectives of the governments that offer these incentives; 2) are aligned with business and operational objectives; and 3) do not carry reputational risk and do not conflict with the fiscal policies of other jurisdictions wherein the Company operates.

UK Tax Risk

Fossil bears ultimate responsibility for ensuring that Fossil UK complies with local tax law and regulations.  The Company has aligned its transfer pricing policy with OECD guidelines as well as the guidelines of the taxing authorities in the various jurisdictions where its subsidiaries are located.  Fossil applies the arm’s length standard to ensure payments to the parties to intercompany transactions are made in accordance with this standard.  Guidance is sought from expert third party advisors when there is uncertainty in the application or interpretation of tax laws.  The process of defining, identifying, managing and reporting income tax risk is the responsibility of the Company’s VP Tax and is reviewed by the Company’s auditors and reported to shareholders at the end of each fiscal quarter.

The Fossil UK Human Resources Director and payroll team are responsible for PAYE.   VAT, Stamp, Customs and Excise duties are the responsibility of the Company’s European Shared Service Center. It ensures that Fossil UK makes timely payments, submits correct returns, and complies with the relevant regulations.

Working with HMRC

All inquiries from tax authorities are addressed promptly and courteously.   In past audits, HMRC has reviewed the methodologies and the economic theory behind our U.K. transfer pricing policies.   The Company has a positive working relationship with HMRC and is committed to open dialog, transparency and disclosure.