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Note 6: Income tax


Pre-tax income amounted to a profit of €727 million (2010: profit €917 million). The net tax charges related to continuing operations are presented below. The total tax charge, including discontinued operations was €183 million (2010: €193 million).

Classification of current and deferred tax result

 

 

 

 

 

In € millions

 

2010

 

2011

 

 

 

 

 

Current tax result for

 

 

 

 

The year

 

(245)

 

(233)

Adjustments for prior years

 

59

 

9

 

 

(186)

 

(224)

 

 

 

 

 

Deferred tax result for

 

 

 

 

Origination and reversal of temporary differences

 

1

 

22

Changes in tax rates

 

6

 

7

Tax losses recognized or unrecognized

 

9

 

1

 

 

16

 

30

Total

 

(170)

 

(194)

Effective consolidated tax rate

 

 

 

 

 

in %

 

2010

 

2011

Corporate tax rate in the Netherlands

 

25.5

 

25.0

Effect of different tax rates in certain countries

 

(1.0)

 

2.6

Tax exempt income/non-deductible expenses

 

2.7

 

0.3

Non-taxable income from investment in associates and joint ventures

 

(0.7)

 

(0.8)

Changes in enacted tax rates (reductions in tax rate)

 

(0.7)

 

(1.0)

Recognition of previously unrecognized tax losses

 

(1.0)

 

(0.1)

Current year losses for which no deferred tax asset was recognized

 

0.5

 

0.4

Current year profits for which no deferred tax asset was recognized

 

(2.0)

 

Under/(over)-provided in prior years

 

(6.4)

 

(1.2)

Non-refundable withholding taxes

 

2.0

 

1.6

Other

 

(0.4)

 

(0.1)

Effective consolidated tax rate

 

18.5

 

26.7

The effective tax rate in 2011 is affected by several adjustments to prior years and by tax-exempt gains, the main one being a release of an antitrust provision. In addition, changes in the geographical mix of taxable income affected the tax burden.

In 2010, the tax rate was low due to several adjustments to prior years, partly related to settlements with tax authorities. Furthermore, there were tax-exempt gains related to acquisitions and divestments and part of a not recognized capital loss was used.

The impact of non-refundable withholding tax is dependent on the relative share of our profit from countries that levy withholding tax on dividends, and on the timing of the remittance of such dividends. This relative share is expected to increase in the coming years. Based on the Dutch tax system there is only a limited credit for such taxes.

Income tax recognized directly in equity

 

 

 

 

 

In € millions

 

2010

 

2011

 

 

 

 

 

Current tax for

 

 

 

 

Currency exchange differences on intercompany loans of a permanent nature

 

(16)

 

(3)

 

 

(16)

 

(3)

 

 

 

 

 

Deferred tax for

 

 

 

 

Share-based compensation

 

(3)

 

(3)

Hedge accounting

 

(15)

 

17

Other

 

(4)

 

(5)

 

 

(22)

 

9

Total

 

(38)

 

6

Deferred tax assets and liabilities

In the deferred tax asset for other provisions (€345 million), an amount of €213 million (2010: €210 million) is related to interest expense carried forward.

From the total amount of recognized net deferred tax assets, €513 million (2010: €515 million) is related to entities that have suffered a loss in either 2011 or 2010 in the tax jurisdiction to which a deferred tax asset relates, and where utilization is dependent on future taxable profit in excess of the profit arising from the reversal of existing taxable temporary differences.

Breakdown of deferred tax assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

Assets

 

Liabilities

 

Assets

 

Liabilities

In € millions

 

 

 

2010

 

 

 

2011

Intangible assets

 

68

 

781

 

61

 

762

Property, plant and equipment

 

64

 

160

 

62

 

156

Inventories

 

33

 

5

 

33

 

4

Trade and other receivables

 

22

 

20

 

31

 

17

Share-based compensation

 

11

 

 

12

 

 

 

 

 

 

 

 

 

 

Provisions

 

 

 

 

 

 

 

 

Pensions and other post-retirement benefits

 

292

 

158

 

247

 

191

Restructuring

 

17

 

3

 

15

 

Other provisions

 

360

 

29

 

345

 

32

Other items

 

200

 

50

 

194

 

16

Net loss carryforwards

 

752

 

 

839

 

Deferred tax assets not recognized

 

(408)

 

 

(415)

 

Tax assets/liabilities

 

1,411

 

1,206

 

1,424

 

1,178

Set-off of tax

 

(617)

 

(617)

 

(611)

 

(611)

Net deferred taxes

 

794

 

589

 

813

 

567

Loss carryforwards in the balance sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

2012

 

2013

 

2014

 

2015

 

2016

 

Later

 

Unlimited

 

Total

Total loss carryforwards (gross)

 

14

 

807

 

32

 

32

 

44

 

444

 

1,570

 

2,943

Loss carryforwards not recognized in deferred tax assets

 

(8)

 

(775)

 

(9)

 

(7)

 

(6)

 

(15)

 

(5)

 

(825)

Total recognized

 

6

 

32

 

23

 

25

 

38

 

429

 

1,565

 

2,118

Unrecognized deferred tax assets

 

 

 

 

 

In € millions

 

2010

 

2011

Capital losses

 

257

 

268

Tax losses

 

29

 

23

Deductible temporary differences

 

122

 

124

Total

 

408

 

415

Deferred tax assets not recognized on the balance sheet are partly related to capital losses which cannot be offset against operational taxable profits.

Movement in deferred tax in 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

Net balance January 1, 2010

 

Changes in exchange rates

 

Acquisitions/ divestments

 

Recognized in income

 

Recognized in equity

 

Net balance December 31, 2010

Intangible assets

 

(704)

 

(64)

 

85

 

(30)

 

 

(713)

Property, plant and equipment

 

(189)

 

(15)

 

9

 

99

 

 

(96)

Inventories

 

25

 

1

 

2

 

 

 

28

Trade and other receivables

 

8

 

 

 

(2)

 

(4)

 

2

Share-based payments

 

15

 

 

 

(1)

 

(3)

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions

 

 

 

 

 

 

 

 

 

 

 

 

Pension liabilities and other
post-retirement benefits

 

243

 

16

 

(1)

 

(124)

 

 

134

Restructuring

 

28

 

1

 

 

(15)

 

 

14

Other provisions

 

282

 

23

 

23

 

3

 

 

331

 

 

 

 

 

 

 

 

 

 

 

 

 

Other items

 

154

 

7

 

 

4

 

(15)

 

150

Net operating loss carryforwards

 

633

 

36

 

 

83

 

 

752

Deferred tax assets not recognized

 

(376)

 

(31)

 

 

(1)

 

 

(408)

Tax assets/liabilities

 

119

 

(26)

 

118

 

16

 

(22)

 

205

Movement in deferred tax in 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

Net balance January 1, 2011

 

Changes in exchange rates

 

Acquisitions/ divestments

 

Recognized in income

 

Recognized in equity

 

Net balance December 31, 2011

Intangible assets

 

(713)

 

(5)

 

(19)

 

36

 

 

(701)

Property, plant and equipment

 

(96)

 

1

 

(4)

 

5

 

 

(94)

Inventories

 

28

 

 

 

1

 

 

29

Trade and other receivables

 

2

 

1

 

2

 

9

 

 

14

Share-based payments

 

11

 

 

 

4

 

(3)

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

Provisions

 

 

 

 

 

 

 

 

 

 

 

 

Pension liabilities and other
post-retirement benefits

 

134

 

(1)

 

 

(77)

 

 

56

Restructuring

 

14

 

 

 

1

 

 

15

Other provisions

 

331

 

8

 

 

(26)

 

 

313

 

 

 

 

 

 

 

 

 

 

 

 

 

Other items

 

150

 

1

 

 

15

 

12

 

178

Net operating loss carryforwards

 

752

 

27

 

5

 

55

 

 

839

Deferred tax assets not recognized

 

(408)

 

(14)

 

 

7

 

 

(415)

Tax assets/liabilities

 

205

 

18

 

(16)

 

30

 

9

 

246

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