Cochlear : 2022 Tax Contribution Report

Cochlear Limited

Tax Contribution Report 2022

Contents

Letter from the CFO	2
About Cochlear	3
Tax strategy and governance	4
Approach to risk management and governance	4
Attitude towards tax planning	4
Accepted level of risk in relation to taxation	4
Approach to engagement with global revenue authorities	4
International related party dealings	4
Income taxes disclosed in 2022 Annual Report	5
Reconciliation of accounting profit to income tax expense	6
Reconciliation of income tax expense to cash tax paid	7
Carried forward tax losses	8
Effective tax rates for Cochlear Limited Consolidated Worldwide Group	8
Tax contribution summary	9
ATO tax transparency disclosures	10

David, Cochlear™ Nucleus® System recipient

Letter from the CFO

I am pleased to present this Tax Contribution Report for 2022 for Cochlear Limited detailing Cochlear's taxes paid in Australia and globally and Cochlear's global tax strategy.

Cochlear has a strong commitment to transparency and compliance from a regulatory and financial perspective and values the principles of being transparent with respect to its tax strategy and compliance here in Australia and globally.

A key driver of our global tax strategy is our longstanding commitment to Australian based research and development (R&D) and manufacturing as well as growing the business with broad economic benefits for Australia. Our tax strategy reflects that most of Cochlear's intellectual property is generated in Australia and the assets, risks and functions of implementing that strategy meant that the majority of Cochlear's corporate income tax was paid in Australia in 2022.

Our R&D, product development and manufacturing are all inextricably linked and substantially based in Australia. We employ a global innovation network of more than 450 R&D employees as well as a large number of employees who are engaged in manufacturing with the vast majority employed in Australia.

We innovate to build a market-leading portfolio of products and services that supports a lifetime of hearing outcomes for recipients. We have achieved this through a multi- decade philosophy of investing to grow and an unwavering commitment to innovation. In FY22 we invested over $200 million in R&D, representing 13% of sales revenue, with many new products and services achieving regulatory approval over the past few years across all parts of the portfolio.

The Cochlear™ Nucleus® 8 Sound Processor achieved CE Mark approval in July 2022; the Cochlear™ Baha® 6 Max Sound Processor was launched in the second half of FY21 with strong demand experienced for the new sound processor and Cochlear™ Remote Assist achieved FDA approval in October, enabling live video appointments for both cochlear implant and Baha® Implant recipients.

We will continue to advocate for Government incentives and initiatives that support Australian-based manufacturing of medical products resulting in highly skilled, well-paid jobs and more investment in the commercialisation of Australia's world-leading medical research.

Stu Sayers

Chief Financial Officer

Cochlear Limited Tax Contribution Report 2022

2

About Cochlear

For over 40 years, Cochlear has been the global leader in implantable hearing solutions. Cochlear commenced operations in 1981 as part of the Nucleus group and in 1995, listed on the Australian Securities Exchange. Today, Cochlear is a Top 50 listed Australian company with a market capitalisation of over A$13 billion.

We aim to improve awareness of and access to implantable hearing solutions for people indicated for our products. We have provided more than 700,000 implant devices to people who benefit from one - or two - of our implantable solutions. Whether these hearing solutions were implanted today or many years ago, we continue to bring innovative new products to market as well as sound processor upgrades for prior generations of recipients.

In FY22, we invested over $200 million in R&D, representing 13% of sales revenue. Since listing, we have invested over $2 billion in R&D and we participate in over 100 collaborative research programs worldwide. Our global headquarters are on the campus of Macquarie University in Sydney, with regional offices in Asia Pacific, Europe and the Americas. We have a deep geographical reach, selling in over 180 countries, with a direct presence in over 30 countries and a global workforce of over 4,500 employees.

For FY22, 57% of Cochlear's sales revenue was from cochlear implant (Nucleus) products and 12% from Acoustics products. Services revenue, which includes sound processor upgrade and accessories sales revenue, accounted for 31% of total sales revenue. On a regional basis, Cochlear sales revenue was split:

• Americas (US, Canada & Latin America) - 48% of sales revenue
• EMEA (Europe, Middle East and Africa) - 35% of sales revenue
• Asia Pacific (Australasia & Asia) - 17% of sales revenue

Cochlear's third party sales are primarily overseas with approximately 95% of revenue in FY22 generated from countries outside Australia.

By contrast, all cochlear implant manufacture is conducted in Australia with bone conduction implant manufacture occurring in Australia, Sweden and Malaysia. Cochlear implant and services revenue account for 88% of our revenue. There is considerable know how associated with this specialised manufacture and the technology that underpins our products has been developed in Australia and is protected by patents. Our tax strategy is aligned with this holding of intellectual property in Australia.

Cochlear Limited Tax Contribution Report 2022

3

Tax strategy and governance

This section on tax strategy and governance is approved by the Audit & Risk Committee. Publication of this statement is regarded as satisfying the statutory obligation under Paragraph 19, Schedule 19, Finance Act 2016 (UK) which prescribes that the UK tax strategy must be published for UK entities of the Cochlear global group. The UK entities to which this strategy applies are Cochlear Europe Limited and Cochlear Research and Development Limited.

Approach to risk management and governance

Cochlear Limited operates in a highly regulated global industry in the area of implantable hearing solutions. Cochlear must ensure it enters into transactions in a way which does not inhibit its ability to design, develop, manufacture and distribute its products globally and which also maintains its reputation with Regulators and Governments in the countries in which it operates.

The Audit & Risk Committee have approved a Tax Risk Management and Governance Framework which reflects the tax risk strategy and management controls relating to tax risk management and governance for Cochlear.

Cochlear's global tax and finance teams work together to identify, analyse and evaluate global tax risks. Key global tax risks are identified by the Tax Manager EMEA for UK and EMEA tax risks, the Tax Manager US for US tax risks, the Group Tax Manager for Australian tax risks and also by the regional heads of finance for global locations and escalated to the Vice President Global Tax and Treasury who is a direct report of, and identifies global tax risks to, the Chief Financial Officer.

Each Audit & Risk Committee has an agenda item on global tax and, where appropriate, matters are reported through to the full Board.

The Audit & Risk Committee review the Tax Risk Management and Governance Framework annually to satisfy itself that it continues to be sound and effectively identifies material areas of potential risk.

Attitude towards tax planning

Cochlear's attitude towards tax planning is to ensure that transactions and compliance activities undertaken by Cochlear in Australia and by its subsidiaries overseas have consideration to the Tax Risk Management and Governance Framework. Where appropriate, Cochlear will engage external advisors on significant transactions and for review of compliance activities.

Cochlear together with its Australian subsidiaries has formed a tax consolidated group for Australian tax purposes with Cochlear Limited as the head company of the Australian tax consolidated group.

Accepted level of risk in relation to taxation

Cochlear's level of accepted risk in relation to taxation is to assess the risk appetite of a transaction or activity in accordance with the Tax Risk Management and Governance Framework. The Audit & Risk Committee reviews this approach annually.

Approach to engagement with global revenue authorities

Cochlear's approach to engagement with global revenue authorities including but not limited to the ATO, Internal Revenue Service and Her Majesty's Revenue and Customs, is to be compliant with tax legislation and fulfil all tax obligations in accordance with local tax laws and practice.

Cochlear's approach is to engage early with global revenue authorities on significant transactions and to ensure cooperative, collaborative and transparent communication.

In this respect, Cochlear has signed two Bilateral Advanced Pricing Agreements with the ATO; one with the National Tax Authority of Japan which has a term of 5 years and

is currently being renewed, and one with the Internal Revenue Service of the United States which has a term of 7 years. Cochlear's dealings with its UK subsidiary based in London are concluded on similar principles but are not encapsulated in a formal Advanced Pricing Agreement. 

International related party dealings

Cochlear Limited is the ultimate parent entity of the Cochlear group. Cochlear has its global headquarters on campus

at Macquarie University in Sydney, Australia, with regional headquarters in Asia Pacific, Europe and the Americas.

As the global manufacturer and developer of implantable hearing devices, Cochlear undertakes the majority of manufacturing and R&D activities in Australia. Cochlear also conducts manufacturing and R&D activities in other locations via service arrangements with its group entities located in Sweden, Belgium and the United States. All new knowledge and intellectual property generated from R&D activities is owned by Cochlear Limited.

Cochlear Limited Tax Contribution Report 2022

4