UPM Annual Report 2024

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Our strategy

Our businesses

Sustainability

OUR COMMITMENTS

CREATING VALUE FOR PEOPLE AND SOCIETY

Regulatory compliance We pay taxes in accordance with local laws and regulations. We follow the principles and guidelines set out in the UPM Tax Strategy, which is based on the standards of the UPM Code of Conduct.

economic and business considerations. We do not transfer the value created, nor do we invest in production or service operations in jurisdic tions defined by the Council of the European Union as non-cooperative jurisdictions for tax purposes or in any similar secrecy jurisdictions.

sible tax reporting. We pay corporate income taxes in the countries where added value is created, and profit is generated. Contributing to society Our mills contribute to local employment, income tax and purchasing power, and are involved in projects with local communities.

Transparent reporting We are committed to transparent and respon

Ethical tax practices The location of our companies is determined by

OUR PRIORITIES

Good governance The Board of Directors’ Audit Committee is responsible for the supervision of tax risk management as part of our risk management processes. UPM’s internal control and risk man agement function regularly reviews tax risks and updates the control framework with the tax function. A more thorough review of the tax In 2024, UPM’s effective tax rate was 7.4% (15.2%), and the cash tax rate was 29.0% (39.5%). The corporate income tax reported in 2024 was EUR 37 million (EUR 71 million), and the corporate income tax paid in 2024 was EUR 145 million (EUR 183 million). In addition to income taxes, our various production inputs and outputs are also subject to taxation, which we either pay (e.g. energy tax or property tax such as taxes on real estate) or collect (e.g. VAT, payroll tax and social security contributions). We paid taxes on real estate, equity and similar properties in various countries totalling EUR 31 million (EUR 37 million). The table on the right shows the corpo rate income tax and taxes on real estate, equity and similar properties paid in our main countries of operation. Based on our corporate and operational structure, UPM mainly reports and pays its corporate in come tax in the countries where production and innovating activity takes place. Corporate income taxes vary by country In Finland, we have significant produc tion operations in our six business areas, as well as research and development operations. As a result, UPM is a signifi

Cooperation with the authorities We aim to cooperate with the tax authorities transparently and proactively. We also value dialogue with other important stakeholders on tax issues. In Finland, UPM cooperates with the Finnish Tax Administration.

practices of customers and suppliers is part of our counterparty risk management processes. The UPM Tax Strategy is supported by internal instructions, internal controls and benchmarking of best practices. Tax matters are managed by our tax function, which is com plemented by third-party tax services for local tax reporting and filing, and other requirements. cant taxpayer in Finland. UPM’s corporate income tax in Finland in 2024 is estimated to be EUR 84 million (EUR 112 million), which includes taxes reported and paid by UPM-Kymmene Corporation and its Finnish subsidiaries. In Uruguay, the government has granted several free-trade zone permits for local and foreign investments. The Uruguayan govern ment has granted our pulp mills a permit to operate in a free-trade zone. Consequently, taxes in Uruguay consist mainly of taxes on property and equity and annual tax-like charges paid to the Uruguayan government for the development of the zone. In China, as a fine paper producer, UPM qualifies as a high-tech enterprise with a reduced corporate income tax rate of 15%. UPM also pays withholding tax on dividends in China. In countries such as Germany where our companies use tax losses from previous years to offset the current year’s tax liability, limited corporate income tax is paid. See more A list of UPM's prinsiple subsidiaries and joint operations and their country of incor poration can be found on page 315.

Contributing to society through taxes

The pulp and paper mills’ third-party verified EMAS reports on environmental and societal responsibility can be found at www. upm.com/sustainability.

Corporate income taxes paid and property taxes *) by country EURm 2024 2023 Finland 96 102 Uruguay 25 25 United States 21 18 China 20 5 Poland 4 3 France 2 2 Estonia 2 1 Germany 1 43 United Kingdom 1 3 Austria 0 5 Other 3 14 Group total 176 221

Our businesses play a significant role in contributing to the societal development of surrounding communities through the tax revenue we generate. The OECD, the G20 Forum and the EU have addressed the tax challenges posed by global economic changes. These solutions aim for a minimum of 15% taxation for companies in their operating countries (Pillar Two) and introduce standardised public tax reporting. We have been transparent and responsible in our tax strategy for years. We welcome initiatives for standardised global tax report ing and fair and responsible tax payments. We monitor global tax developments and assess how they affect UPM, adjusting our tax reporting accordingly.

ENERGY TAXATION AT VARIOUS LEVELS OF THE VALUE CHAIN

The European Commission aims to reform the current energy taxation as part of the Euro pan Green Deal and Fit for 55 climate package. Energy taxation is relevant to us not only as a significant electricity producer but also in our manufacturing processes and the taxation of end products, as well as taxation at various levels of the supply chain. The electricity we produce is subject to electricity taxation, regardless of the sources used. The majority of our electricity generation is CO 2 -free hydropower and nuclear power. In addition, our renewable products (UPM BioVerno diesel and naphtha) are subject to energy taxation. However, the energy tax rates for transport fuels from renewable and sustainable sourc es, such as UPM BioVerno, are lower than those for fossil fuels. Most of the energy used in our production processes is subject to energy taxation, with differ ent tax rates and exemptions, depending on the type of use. We also pay a significant amount of energy tax on fuels for logistics costs, particularly road transport. Within the EU, energy taxation laws allow member states to compensate for the taxes paid or apply lower tax rates for industrial production, and countries where we have production facilities, such as Finland and Germany, offer such tax relief.

*) Property taxes include taxes on real estate, equity and similar properties paid by country

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UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024