Fair fiscal practices

Corporate income tax and other taxes can generate necessary revenues and prevent passing the bill for funding today’s society to future generations. Excise tax can also ensure that societal costs are reflected in a product’s price, thereby encouraging consumers and producers of these products to shift to less harmful options.

Philip Morris International (PMI) is a good corporate citizen everywhere we operate. Paying taxes commensurate with our economic activities is not only our duty but the responsible thing to do and a key component of our social contract in every country in which we do business.

In addition to the taxes reported by PMI legal entities, third-party importers and distributors in many countries are responsible for paying import duties and excise taxes on our products. Though such payments may not appear in PMI’s financial statements, they represent a portion of the product taxes paid by our consumers worldwide and so are included in the table below. 

Our tax strategy

Legal obligations and societal expectations require that our transactions are based on sound tax strategies and that we act in good faith in all interactions with tax authorities and other stakeholders. In this regard, we have developed PMI’s tax strategy embodied in PMI’s Global Tax Strategy (read more here) and the PMI Global Tax Documents, including all global and affiliate tax policies, standards, and guidelines. PMI’s Global Tax Strategy was approved by the Audit Committee of the PMI Board of Directors and defines our approach to managing our tax obligations in every country where we operate. It also sets out our strategic objectives in the tax area and the guiding principles which we follow in achieving these objectives.

PMI’s tax strategy includes, for example, that we commit to complying with the spirit as well as the letter of the applicable local and international rules and regulations, including accurate and timely fulfillment of our tax reporting and disclosure obligations.

PMI’s tax strategy is to maintain a comprehensive, effective, and practical risk management program, shared best practices, a structured and documented control framework, proper planning, and coordinated decision-making. These measures ensure that tax positions taken are appropriate and tax compliance and reporting mechanisms are robust.

Moreover, PMI considers it important to have in place tax policies, standards, and guidelines that allow us to pay our taxes in a sustainable manner by balancing the interests of our various stakeholders, including our consumers, our investors, and the countries where we do business.

PMI’s consolidated reporting of income taxes follows U.S. Generally Accepted Accounting Principles (GAAP) and Securities and Exchange Commission (SEC) rules and regulations.

PMI’s tax strategy and its implementation are the responsibility of the PMI Tax Department, a centralized, fit-for purpose global organization led by the Vice President, Tax who reports to PMI’s Group Chief Financial Officer. PMI Global Tax Documents are standardized and applied consistently.

Principles of tax governance

PMI has implemented governance arrangements that set clear accountabilities for the management of tax compliance and tax planning.

The PMI Global Tax Documents are designed to ensure clarity regarding:

Roles and responsibilities: PMI Global Tax Documents clearly define roles and responsibilities with respect to tax matters. We ensure that all tax-related decisions are taken with due professional care and diligence and that the PMI Tax Department personnel have access to continuous professional training and development. 

Involvement of the PMI Tax Department: PMI colleagues consult with the PMI Tax Department on all matters that have potential tax consequences for the company, including important transactions, whether recurring or new, as well as on business structures and operations involving other PMI affiliates or unrelated parties. The PMI Tax Department determines positions, exposures, and actions regarding material, nonroutine tax or customs matters. Where there is sufficient uncertainty over the appropriate tax treatment of a particular transaction or a potentially significant impact, PMI obtains external advice. 

Tax reporting and procedures: PMI has designed its Global Tax Documents to have effective and predictable tax compliance and control measures in place. All tax filing obligations (internal and external) must be accurately completed on a timely basis in accordance with applicable laws and regulations. In particular, the PMI Tax Compliance Program establishes an overarching framework for the management of global tax compliance and risk across the company. This program includes guidance on defining roles and responsibilities, personnel training and development, involvement of tax advisers, master data management, contract management, interacting with tax authorities, and preparing for audits. It also provides guidelines for specific tax areas, including indirect taxes and customs topics, corporate income tax, withholding taxes, and transfer pricing.

Documentation and tax records: The PMI Tax Department is part of the team responsible for the appropriate creation, retention, and/or oversight of all relevant local tax records in each affiliate.

Support and review of business activities: The PMI Tax Department reviews business structures and transactions to identify potential tax risks. For new business activities, the PMI Tax Department is involved in every step of the process, from the setup of business models and agreements to discussions with tax authorities.

Business and economic substance

As of December 31, 2025, PMI products are sold in approximately 170 markets worldwide. The company has more than 200 affiliates that operate in more than 90 countries and 50 PMI-owned manufacturing facilities. Our business structures have commercial substance and purpose.

PMI endorses the work of the Organisation for Economic Co-operation and Development (OECD) and Group of Twenty (G20) to prevent tax base erosion and profit shifting. Our policies, standards, and guidelines ensure that PMI pays taxes commensurate with our economic activities and substance in each country in which we operate.

PMI complies with local country transfer pricing legislation and the OECD’s transfer pricing guidelines, including the Base Erosion and Profit Shifting (BEPS) project, which entails the preparation of a Country-by-Country Report (CbCR). This report includes quantitative and qualitative data and contributes to a better understanding of our economic and tax responsibilities in each country where we operate. PMI also complies with the Directive (EU) 2021/2101 (amending Directive 2013/34/EU) which requires the public disclosure of certain data. 

We pay taxes which are legally due in the countries where we operate. We aim to be efficient in our tax positions, and our tax planning is always built on strong business rationale or business purpose and is assessed from a tax risks perspective. We do not have in place any contrived tax structures. We also do not abuse tax havens and do not operate “letter box” companies.

Tax risk management strategy

PMI conducts all intercompany transactions on an arm’s-length basis in accordance with current OECD principles.

In line with the recommended best practices issued by the OECD within BEPS, PMI seeks to increase its tax certainty by entering into Advance Pricing Agreements (APAs). An APA is an agreement entered into between a taxpayer and the tax authorities of one (unilateral APA) or more (bilateral or multilateral APA) jurisdictions. It confirms the selection and application of the transfer pricing method used to set up the prices in intercompany transactions.

PMI currently has a portfolio of at least 20 active APAs, both unilateral and bilateral. These APAs are a key part of our strategy to obtain tax certainty.

Apart from APAs, PMI uses other mechanisms to manage its tax positions. When relevant and feasible, we have upfront conversations with tax authorities in the countries where we operate. In certain instances, we obtain tax rulings to provide a higher level of certainty for both PMI and the tax authorities. Such rulings are not the only means of securing transparency and certainty, as we also have joined cooperative compliance programs with tax authorities in several countries, with the aim of establishing PMI as a low-risk taxpayer in the relevant jurisdiction. For example, PMI participates in the “Adempimento Collaborativo” program in Italy and the “Program Wspoldzialania” in Poland. Such programs establish a relationship of trust between the tax authorities and taxpayer and increase certainty on relevant tax issues.

Where there is sufficient uncertainty over the appropriate tax treatment or a potentially significant impact of a particular transaction, PMI obtains external counsel opinions.

On an annual basis the PMI Tax Department carries out internal reviews of the selected corporate income tax and indirect tax topics at the selected affiliates following the risk based approach. The reviews are focused inter alia on assessing tax positions and/or tax processes as well as supporting documentation on a sample basis to ensure tax compliance and good tax risk management practices. 

Relationships with tax authorities

As is the case with other multinational companies, PMI’s tax returns are regularly audited by tax authorities. PMI responds to tax audit requests in a timely manner while ensuring full transparency regarding our business operations. Our working relationships with governments and fiscal authorities are conducted in a professional and collaborative manner. Our proactive approach in dealings with tax authorities is aimed at achieving tax certainty and minimizing disputed issues as well as at ensuring that tax authorities have a good understanding of our business and our approach to tax matters.