Corporate responsibility:
Fiscal Transparency

Our commitments to good governance, transparency and integrity, along with creating value for shareholders and investors, govern our business management and corporate activities.

At Colonial we are aware of the importance of our contribution to public finances and sustaining them in accordance with our economic capacity by punctually complying with our tax obligations based on the principles of fiscal responsibility and transparency.

At Colonial we are committed to acting with transparency, honesty and respect for the law and the good of the community when managing our tax affairs. Our commitment is to comply with the law by making a reasonable interpretation of them, cooperating with the authorities and providing them with the necessary information. In this context, compliance with prevailing tax legislation at all times is part of the principles that inspire Colonial's corporate responsibility, with the taxes paid being one of its contributions to the economic and social development of the society in which it operates.

Colonial's tax strategy is governed by the following guidelines:

• Reducing tax risk and preventing those conducts that are likely to generate them by promoting ethical and upright behaviour that complies with prevailing tax requirements.
• Avoiding the use of opaque structures for tax purposes, understood as those intended to prevent the relevant Tax Administrations of the final party responsible for the activities or the ultimate owner of the assets or rights involved becoming aware.
• Using the specific instruments laid down by the regulations and the Code of Best Tax Practices (prior consultations with the tax authorities, prior assessment agreements, etc.) to reduce conflicts and litigation derived from the applicable regulations being interpreted differently.
• Collaborating with the relevant Tax Administrations in detecting and searching for solutions regarding fraudulent tax practices that may unfold in the markets in which Colonial operates.
• Providing the tax-related information and documentation requested by the relevant Tax Administrations, in the shortest possible time and with the necessary scope.
• Promoting cooperative relations with the Tax Administration.

Colonial's Tax Strategy was approved by Colonial's Board of Directors on 10 December 2015 and is updated when required. 

The Audit and Control Committee (hereinafter, ACC), in accordance with the Regulations of the Board of Directors, is entrusted with the function of overseeing the operation and effectiveness of Colonial's risk management and control system, including any tax-related risks. In this regard, the ACC monitors the fiscal strategy approved by the Board of Directors through the annual fiscal report. In particular, the ACC issues a prior report to the Board of Directors on (i) the creation or acquisition of interests in special purpose entities or entities with registered offices in countries or territories that are considered tax havens, (ii) the operations with related parties, and (iii) the main operations with economic and tax significance, especially on corporate reorganisation operations.

Colonial has neither created nor holds any interests in entities domiciled in non-cooperative jurisdictions or low or no-tax territories.

In accordance with the foregoing, the ACC is responsible for directly overseeing the Internal Audit unit, as the unit responsible for ensuring the company's risk control and management systems work properly. It ensures the Management participates in strategic decisions on risk management and control and fosters a culture in which risk is a factor to be considered in all decisions and at all levels within the company.

The tax risk management and control model is made up of five elements that, combined, pursue an adequate control system for risk prevention:

• Control Environment: set of standards, processes and structures that constitute the basis on which the organisation's internal control is developed.
• Risk assessment and control activities: this is carried out jointly by the Internal Audit unit and the process managers and risk owners. Each tax risk identified has at least one control activity intended to prevent a risk from occurring and mitigate its impact.
• Oversight activities: this is continuously monitored to check whether its design and operation are adequate with respect to the requirements of the applicable regulations by analysing and resolving the identified incidents.
• Information and Communication: the required initiatives are promoted to be appropriately disseminated and train staff, so that the members of the company can comply with the regulations.
• Disciplinary system: non-compliance with the measures contemplated in the model and with the company's rules of conduct are sanctioned by applying the Colonial sanctioning regime contemplated in the company's Collective Agreement.
   

Colonial's Tax Risk Management Policy, which is intended to be the base document of Colonial's tax control framework, was approved by Colonial's Board of Directors on 10 December 2015 and is updated when required.

The aforementioned Policy seeks to regulate the principles that should guide Colonial's tax function in order to carry out proper management and control of tax risks by building:

• The principles that should guide the management of tax risks by establishing the obligations and responsibilities within the organisation in this regard and including a description of the measures that must exist to mitigate the possible tax risks identified.
• The principles that should guide the correct control of tax risks, which firstly include performing a set of ex ante preventive controls and, secondly, performing a set of ex-post controls that entail identifying, measuring, analysing, monitoring and reporting them.
   

For Colonial, due diligence is an important factor when doing business, both in relation to controlling the selection of the organisation's members (internal due diligence) and the third parties with whom it relates (external due diligence).

In relation to the group's investee companies, Colonial will strive to apply Colonial's Tax Strategy and Tax Risk Management and Control Policy, except in those cases in which, considering their specific characteristics, said companies have their own tax strategy or their own tax risk management and control policy.

Section C.2.1 of the 2024 Annual Corporate Governance Report describes the main actions taken by the ACC during the year, including those relating to the Company's tax affairs.

Additionally, in the following document you can find more detail of the activities carried out in relation to tax matters.

Properly explaining the importance of the Colonial Group's tax contribution is a priority for Colonial from the point of view of transparency and corporate social responsibility.

In this regard, Colonial publicly breaks down the main tax payments in those countries in which it operates, which reflects the importance given by Colonial to tax matters, as well as its level of commitment to the main stakeholders.

All this information can be accessed in the following document: Colonial Group tax contribution.

Financial tax information
The breakdown of Colonial’s tax expense is detailed in the consolidated financial statements of Colonial and its subsidiaries and in the separate financial statements of Inmobiliaria Colonial, SOCIMI, S.A., specifically in Notes 19 and 18, respectively

Non-financial tax information
The breakdown of non-financial information can be found in section 2.2.2 of the Fiscal Transparency Report for fiscal year 2024.

Inspections

Periods open to review by the Tax Authorities
On 2 November 2022, Colonial was notified of the commencement of general verification and investigation audits for corporate income tax for 2018 to 2021, and for value added tax, withholdings on account of non-residents and withholdings and payments on account of income from employment, professional activities and economic activities for the period October 2018 to December 2021.

During the months of June and July 2024, the acts in conformity were signed, which have not had a significant impact on the Company. Also, within the framework of the inspection activities, the effects derived from the declaration of unconstitutionality of Royal Decree-Law 3/2016 that limited the compensation of negative tax bases of certain entities have been regularized.

The Company has the last three fiscal years open for review for all taxes applicable to it in Spain.

Inspections originating in prior years
In Spain, at the beginning of 2024, five inspection processes for the Construction, Installations and Works Tax are open for works carried out in buildings in Madrid.

At year-end 2024, two procedures were closed out with Madrid City Council and two procedures with Barcelona City Council.

Inspections during 2024
In 2024, Madrid City Council initiated one inspection of the Construction, Installations and Works Tax.

None of these have had a significant impact for Colonial.

Litigation
Most of Colonial's tax litigation processes arise from a process for returning undue income, where the relevant taxes are paid in a timely manner, and subsequently it asks for the amount paid to be refunded. Said refund request could be rejected by the Administration, in which case Colonial would challenge the refusal, thus starting court proceedings. By following this procedural strategy, Colonial avoids generating contingencies in its accounts without losing the legitimate interest to defend its position in the Courts.

The most relevant cases of litigation refer to the appeal against settlements of the Transfer Tax and Stamp Duty arising from the purchase of property owing to disagreement concerning the value stated in the public deed and the value assigned by the Administration. During 2024, the last of the cases of litigation has been resolved in favour of the company.

During fiscal year 2024, two new cases of litigation have been filed in relation to IIVTNU challenges derived from new pronouncements of the Constitutional Court and the Supreme Court, which would open the way for the claiming of undue income from said municipal capital gains.

Colonial has no reserves for tax litigation, nor does it expect potential significant impacts derived from open litigation.

Low tax territories
According to Article 529 of the Corporate Enterprises Act (RDL 1/2010 of 2nd of july), the boards of directors of listed companies may not delegate certain decision-making powers, including the power to approve the creation or acquisition of shares in special purpose vehicles or entities domiciled in countries or territories considered tax havens, as well as any other transactions or operations of a similar nature the complexity of which could make the company and its group less transparent.

In Colonial's eyes, a tax haven or non-cooperative jurisdiction is any territory that either allows tax avoidance or facilitates a lack of investment transparency and that qualifies as such under current law and regulations.

Colonial's policy is that investments must not be made in or through territories classified as tax havens or non-cooperative jurisdictions with the intention of reducing the tax burden. Furthermore, Colonial does not use entities based in tax havens or non-cooperative jurisdictions in order to hide the true owner of income, activities, assets or rights.

Colonial Group does not have any investments in territories classified as tax havens or non-cooperative jurisdictions.

Colonial adheres to the Code of Best Tax Practices as a result of the resolution adopted by the Colonial Board of Directors in its session on 10 December 2015. In this regard, certain behaviours that are compulsory for the company have been developed including:

• Colonial's tax strategy must have been established by its Board of Directors, documented and known to the company's senior executives.
• The Board of Directors must have approved the operations and investments with special tax risk.
• The company's risk management policy must include measures to mitigate the tax risks identified and have established internal corporate governance rules in this area and compliance with which may be subject to verification.
• The company must have used effective information systems and internal control of tax risks, insofar as its design and operation are fully integrated into the general internal control systems of the business it undertakes. 
   

During 2024, Colonial presented the Annual Tax Transparency Report for 2023, following the proposal for the reinforcement of good corporate tax transparency practices of the companies adhering to the Code of Good Tax Practices.

Likewise, in compliance with the Corporate Governance regulations on tax matters and the Code of Best Tax Practices, the Audit and Control Committee is periodically informed of the company's tax situation.

In relation to tax issues, Colonial tries to respond to all the questions that are raised by the different stakeholders through the different existing communication channels. Colonial offers its employees, directors, shareholders, suppliers, contractors and subcontractors a Ethical Channel through which they may confidentially and anonymously raise any query or report any irregularity of which they become aware and which falls within the scope of the Code of Ethics.

Colonial does not hire tax advisory services with the firm that audits its annual accounts.

The services provided by the audit firm during 2024 are limited to those referring to the actual account audit services, as well as limited reviews of the financial statements and other minor services related to the audit, which include support for limited reviews, issuing comfort letters, reports on agreed procedures for ratios linked to financing contracts and the net asset value of assets, as well as limited assurance work on certain ESG indicators and review of the Green Bonds Report. In 2024, the auditor did not provide tax services, or other services other than the above.

The Independent auditor's report for 2024 is available at this link.

Colonial has a model for preventing regulatory risks, including criminal risks. This model's main tools are the Code of Ethics, the Manual for the Prevention of Criminal Risks, the Manual for the Prevention of Money Laundering and the Financing of Terrorism and the Internal Code of Conduct in the area of ​​the Securities Market. These tools, together with the Ethical channel, provide Colonial with a solid regulatory framework that includes its values ​​and principles in terms of ethics and regulatory compliance.

This Model is intended to prevent non-compliance with the regulations applicable to Colonial, and therefore crimes being committed within its activity. It is a structured and organic system that has monitoring and control procedures and activities managed by the Regulatory Compliance Unit, which functionally reports to the Audit and Control Committee.

The criminal risks that are subject to review in the Colonial Model include money laundering and the crime of asset stripping.

All the company's professionals are responsible for executing and complying with the Model and the different tools that comprise it are available on the company's Intranet. Likewise, the company has an annual training plan run by the Regulatory Compliance Unit through which initiatives are promoted for their dissemination and understanding.

Colonial offers its employees, directors, shareholders, suppliers, contractors and subcontractors a Ethical Channel through which they can confidentially and anonymously raise any query or report any irregularity of which they become aware and which falls within the scope of the Code of Ethics.

The Regulatory Compliance Unit is tasked with receiving and processing queries and complaints through the platform itself and in accordance with the Whistleblowing Channel Regulations, which are available on the corporate website.

Persons who make any kind of query or complaint, provided they do so in good faith, will be protected against any form of reprisal, threat, extortion, discrimination or criminalisation on the basis of the disclosures made.

Finally, the Model is continuously overseen by the Internal Audit and the Regulatory Compliance Unit and the results of said oversight are submitted to the Audit and Control Committee, which is the body responsible for overseeing the operation and compliance of the Model.