Equinor : Tax Contribution Report for 2023

2023 Tax contribution report

Contents

Introduction

Our business

Our approach to tax

Governance

Our key tax issues

Our contribution

Introduction	3	Our key tax issues	19
- About this report	3	- Our approach to tax policy	19
- Key Financials 2022	4	- Effective tax rate	20
- Message from Torgrim Reitan, CFO	5	- Deferred tax	20
Our business	7	- Windfall taxes	21
- Tax subsidies	21
- Transparency timeline	7
- Tax incentives and relief for
- Overview of taxation and 'government
capital expenditure	21
share' in the energy industry	8	- Transfer pricing	22
- Our business model	9
- Other taxes	24
- Sustainability	13
Our approach to tax	15	Our contribution	25
- Payments to governments	25
- Our tax strategy	15
- Our tax compliance	16	- Other contributions	26
- Our tax risk control framework	16	- Country-by-country reporting	26
Governance		- Entity overview	26
17
- Our relationships with governments
and communities	17
- Our interactions with tax authorities
including disputes and negotiations	18
- Industry representation and
stakeholder engagement	18
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	Introduction	Our business	Our approach to tax	Governance	Our key tax issues	Our contribution

Introduction

About this report

Equinor is committed to conducting our business activities in an open and transparent manner, promoting transparency in our industry, and supporting efforts to improve openness and accountability worldwide. This tax contribution report forms part of a long history of tax transparency initiatives we have undertaken which demonstrates our commitment to

these objectives.

This report has been prepared to give more insight to our stakeholders; to allow Equinor to engage constructively, and to enable greater understanding and knowledge about Equinor's contributions to society. As our business has a significant presence in over 30 countries worldwide, we believe that transparency is vital to ensure that the wealth derived from the energy we produce is put to effective and equitable use in the societies where we operate.

This report has been produced in accordance with the GRI 207 tax standard and demonstrates our ongoing progress towards greater levels of transparency. It builds upon our other published materials such as our Payments to governments report and our Integrated annual report, to go beyond the requirements of mandatory initiatives as we work to contribute to the better understanding of our approach to taxation and the way it impacts investment in the transition to a net zero-carbon world.

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Tax Contribution Report 2023

	Introduction	Our business	Our approach to tax	Governance	Our key tax issues	Our contribution

Key financials 'at a glance' 2022

1 A government entitlement refers to revenues from petroleum production which are allocated to the host government under production sharing agreements or contracts.

$45.2 billion

paid in corporate income tax to tax authorities

$4 billion

paid in host government entitlements1, royalty payments and fees

to local and national governments

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Always safe,

high value, low carbon.

We are Equinor, an international energy company.

$10 billion

in capital expenditure and other investments

$1.3 billion

paid in employment taxes in Norway

Tax Contribution Report 2023

	Introduction	Our business	Our approach to tax	Governance	Our key tax issues	Our contribution

Message from Torgrim Reitan, CFO

I am pleased to present our annual Tax Contribution report for 2022, a year that demonstrated how important and valuable energy is to society. Strong operational performance in a year with high energy prices led to strong earnings for Equinor, and Equinor group companies made a contribution of $49.2 billion globally through tax, host government entitlements, royalty and fee payments for 2022. Of this total, $44.3 billion was paid in Norway. These tax payments help fund vital welfare and public services as well as support government initiatives designed to tackle climate change and strengthen societies.

The ongoing geopolitical landscape highlights the importance of balancing the energy trilemma of energy security and affordability, while transitioning to low-carbon energy systems. Through the year Equinor became a leading provider of energy

to Europe. Russia's invasion of Ukraine and weaponisation of energy brought unprecedented volatility and undermined the secure supply of reliable energies to Europe. Tragically, the war continues to impact lives and livelihoods causing deep uncertainty. As part of an aligned response to the invasion, Equinor decided on 27 February 2022 to exit Russia and this process was fully completed in September 2022.

We remain firm on our strategy in the face of these uncertainties. We aim to be a leading company in the energy transition as we develop towards becoming a net-zero company by 2050. We continue to innovate and take the necessary steps to decarbonise industries and societies by accelerating our investments in energy from renewable sources and in low-carbon solutions, while seeking to produce the oil and gas the energy system still relies on, with as low emissions as possible.

We invested $10.0 billion in operations and projects throughout 2022, and our annual gross capital expenditure in renewables and low-carbon solutions continues to grow - as a percentage of total capital expenditures - up from 11% in 2021 to 14% in 2022. We have an ambition to allocate more than 50% of our gross capital expenditure to renewables and low-carbon solutions by 2030.

Equinor promotes policies supporting the goals of the Paris Agreement and supports a price on carbon emissions as a measure to drive broader emission reductions in society. Our stakeholders rightly expect us to be transparent about tax payments, including those that contribute to the business meeting its sustainability goals. This is why we continue to disclose information on our

environmental taxes and quotas profile in this report, for the second year running.

Openness is one of Equinor's values and a vital approach to the way we do business throughout our history. Since we began our transparency journey back in 2001, we have progressively built on our existing disclosures over the years. This year we disclose the contribution made by Equinor through employment taxes in Norway for the first time. Equinor ASA paid a total of $1.3 billion in employment taxes to the Norwegian government in 2022, representing taxes paid on behalf of 87% of our global network of 22,000 highly skilled employees.

Tax transparency is not just about numbers in isolation. It is also about providing an overview of how we conduct our business, our corporate structure and of our presence in different jurisdictions. With this report we aim to provide further insight to all stakeholders about the taxes we pay. We also explain our tax objectives, our policies and approach to tax that helps us meet our objectives.

We welcomed initiatives to strengthen fairness in taxation, revenue transparency, and other related legislation, both in Norway and internationally.

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Tax Contribution Report 2023

	Introduction	Our business	Our approach to tax	Governance	Our key tax issues	Our contribution

At a global level in the last year, the OECD has continued to build on the BEPS Inclusive Framework. We support the framework and the ongoing efforts by the OECD to introduce the Pillar Two rules concerning the implementation of a global minimum corporate tax. We will continue to seek further clarification on these rules, and the potential impact they may have on our business, as the OECD publishes further guidance.

We see increased transparency as an important element in the fight against climate change, corruption, and financial mismanagement. It

is a foundation for good governance allowing businesses to prosper, enhance accountability and foster dialogue with stakeholders to promote progress for society.

This report is a cornerstone of our effort to provide transparency about our tax policies and taxes paid. We hope that it provides greater insights into how transparency underpins our values and our purpose here at Equinor.

We welcome feedback from our stakeholders on this report and its contents.

Torgrim Reitan, CFO

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Tax Contribution Report 2023

Introduction	Our business	Our approach to tax	Governance	Our key tax issues	Our contribution

Our business

Transparency timeline

Equinor has a long history of

2001

2002

Information was given on signature bonuses. We welcomed the international transparency initiative (later called EITI) in cooperation with Transparency International.

2003

Active support for EITI; we attended the first meeting in London.

2004

transparency initiatives.	We published our first
	Annual Sustainability Report.
	The company stated that it is
	committed to transparency
	and recognised the dilemma
	of limited transparency in
	many oil rich countries.

2011

Signature bonuses and profit oil in kind were included in the country- by-country overview.

2009

We became an

Extractive Industries

Transparency

Initiative (EITI)

Board Member.

We voluntarily disclosed our country-by-country overview of taxes paid, with other relevant information.

2006

More detailed information was provided on signature bonuses (including operator's share).

2022

We published our first integrated annual report.

2014

In a separate publication, we reported under Norwegian mandatory rules that require project level reporting. These Norwegian rules go beyond those of the EU. Norway was the first country to bring these rules into effect. Norwegian rules also mandate contextual information, including a listing of economic impact by country and a listing of all the Group's subsidiaries with the number of employees and intercompany interest payments.

2016

We incorporated the Payments-to-Government report in the Annual Reporting package.

2021

We published our first tax contribution report.

2018

We published our global tax strategy on our website.

2017

We reported under updated Norwegian rules. These were put in place to combat tax planning that lead to tax avoidance and include detailed information on revenue, tax and earnings for all subsidiaries.

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Tax Contribution Report 2023

Introduction	Our business	Our approach to tax	Governance	Our key tax issues	Our contribution

Overview of taxation and "government share" in the energy Industry

Summary

Energy companies typically share extracted resources with the host governments of the jurisdictions in which they operate. There are generally two types of fiscal regimes:

A. Fiscal regimes for petroleum

Because petroleum is considered a national resource, the design and implementation of a particular jurisdiction's petroleum fiscal system is a critical and sometimes complex matter.

1. A concessionary regime is one where the petroleum company applies or bids for license concessions, takes title to the petroleum it extracts and pays taxes on profits and other levies, either under the ordinary corporate tax regime or under a special petroleum tax regime. For example, in Norway, with effect from 1 January 2022, the Norwegian parliament enacted a cash-flow based system for the special petroleum tax.

After the reform, the standard corporate income tax rate is 22% and the special petroleum tax rate is 71.8%. The corporate tax is deductible in the basis for the special petroleum tax, resulting in a marginal tax rate on petroleum income of 78%. Investment costs in the ordinary tax base (22%) will continue to be depreciated over six years. In the special tax base, investments are written off immediately in line with the cash- flow based tax system.

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1. A contract regime, most often a production sharing or risk sharing contract, where the government generally retains legal title to production and enters into a contract with a petroleum company to extract the hydrocarbons in exchange for a share of production, plus, in many cases, ordinary tax and other levies.

In this type of fiscal system, material terms of the government share of project revenues are usually negotiated with governments at the license, field, or development area level. In addition, in many cases, petroleum contractors are obliged to make direct (income) and indirect tax payments to governments in addition to people and environmental taxes and bonuses. Production sharing and royalties generally begin when oil production commences, rather than when project profitability is achieved.

Equinor has made public its position that we support and will advocate for the public disclosure by host countries of their petroleum contracts and licenses.

B. Fiscal regimes for renewable energy

Taxation of renewable projects is roughly similar to concessionary taxation for oil and gas companies. Generally, investors in renewable projects such as wind or solar, are given concessions to establish operations by a local or national authority and are subject to ordinary corporate income tax. The various incentives, if any, available to investors - tax credits, accelerated depreciation, etc. - do not change the fundamental nature of these investors as corporate income taxpayers according to local laws.

Tax Contribution Report 2023

Our business model

We have included an overview of our business model to explain how our tax profile interacts with our operations at different points in the business cycle. The chart below shows the different phases of our business model around the world.

Equinor has made public its position that we support and will advocate for the public disclosure by host countries of their petroleum contracts and licenses.

Introduction	Our business	Our approach to tax	Governance	Our key tax issues	Our contribution

Argentina

Brazil

Suriname

Bahamas

USA

Canada

Angola

Nigeria

Algeria

Libya

Germnay

Poland

Ireland

UK

Belgium

Netherlands

Norway

Denmark

Azerbaijan

India

Tanzania

Russia

South Korea

Japan

China

Singapore

Exploration

Development & production

Marketing & trading

Refining & processing

Low carbon project funnel

Renewables

Operator of assets

Presence

Representative oˆice

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Tax Contribution Report 2023

Introduction	Our business	Our approach to tax	Governance	Our key tax issues	Our contribution

Upstream operations

Exploration phase: This part of our model refers to the acquisition of prospecting contracts and exploration and proof of resource deposits.

During this phase, which generally lasts several years, relatively large capital investments are incurred by petroleum license holders. In spite of the fact that revenues will not be earned, potentially for several years after a commercial discovery, there are significant payments to governments by the license holders and their sub-contractors, including bonus (signature, resource discovery) payments when certain criteria are met, certain lease or rental payments for areas of exploitation, tax payments on behalf of employees, excise duties, various indirect tax (VAT) collections and payments. In addition to financing its share of exploration expenditures, companies like Equinor are often required to finance (at low or no interest) the investment in the field representing the share owned by the state.

Corporate income tax payments are generally not made during this phase of our business. If a discovery is ultimately developed, Equinor is often able to recover expenditure incurred during this phase via various reliefs and incentives. For more information, please see 'Relief for Capital Expenditure' under the section 'Our Key Tax Issues'. However, in cases where a prospective well drilled is not commercial in a jurisdiction where Equinor has no other income generating activity, the costs of drilling are generally not recoverable which increases Equinor's effective tax rate on a company level.

Development: This phase of our business model involves the construction and installation of production facilities and extraction of resources via drilling wells.

Development and construction of facilities for production is capital intensive and requires significant investment including, as noted above, the share owned by the state. During this period, our suppliers are generally subject to tax in the jurisdictions in which development occurs, whereas, in many cases, Equinor's recovery of its investment is deferred until production begins or when accumulated income becomes positive.

Production: When oil or gas is first produced in a well, significant payments are made to governments, including production sharing, bonus payments, royalties and other indirect taxes. In cases where the state owns a share of the field directly, it also starts receiving its returns from production. When accumulated income exceeds expenditure, production sharing rates generally increase, and income tax payments are made.

Revenues are also highly exposed to external market conditions and price fluctuations during this period; this can adversely impact overall profitability and increase the period of time it takes to recover investment during the exploration and development phases.

Decommissioning: This is the final phase of a project lifecycle which involves the removal of infrastructure and site restoration once a resource deposit has been exhausted.

The main payments during this phase relate to site restoration which can be significant. In many jurisdictions, costs for decommissioning are recovered against income from other activities in the same country, can be offset against prior period income or are deductible as accrued or as pre-payments are made. However, there are instances where substantial decommissioning costs are not recoverable for tax purposes, contributing to an increase in Equinor's global tax rate.

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Tax Contribution Report 2023