Note 6: Income tax

Pre-tax income from continued operations amounted to a profit of €772 million (2012: loss €1,390 million). The net tax charges related to continuing operations are included in the statement of income as follows:

Classification of current and deferred tax result

 

 

 

 

 

In € millions

 

2012

 

2013

 

 

 

 

 

Current tax expense for

 

 

 

 

The year

 

(257)

 

(147)

Adjustments for prior years

 

31

 

6

 

 

(226)

 

(141)

 

 

 

 

 

Deferred tax expense for

 

 

 

 

Origination and reversal of temporary differences and tax losses

 

20

 

(74)

Re-recognition of deferred tax assets

 

5

 

97

Changes in tax rates

 

(2)

 

7

 

 

23

 

30

Total

 

(203)

 

(111)

The total tax charge, including discontinued operations was €69 million (2012: €186 million).

Effective consolidated tax rate

 

 

 

 

 

in %

 

20121

 

2013

1

Excluding impairment.

Corporate tax rate in the Netherlands

 

25.0

 

25.0

Effect of tax rates in other countries

 

3.8

 

5.7

Tax exempt income/non-deductible expenses

 

2.7

 

(3.2)

Non-taxable income from investment in associates and joint ventures

 

(0.6)

 

(0.5)

Changes in enacted tax rates

 

0.3

 

(0.9)

Recognition of previously unrecognized deferred tax assets

 

(0.7)

 

(14.1)

Current year losses for which no deferred tax asset was recognized

 

1.3

 

1.7

Current year profits compensated with losses for which no deferred tax assets was recognized

 

(0.1)

 

0.0

Under/(over)-provided in prior years

 

(4.4)

 

(0.8)

Non-refundable withholding taxes

 

4.0

 

1.5

Effective consolidated tax rate

 

31.3

 

14.4

Effective tax rate reconciliation

The effective income tax rate based on the consolidated statement of income is 14 percent. The tax line includes a non-cash gain as a result of the recognition of €123 million of previously unrecognized deferred tax assets and several non-taxable items. Excluding these effects, the tax rate is 30 percent. The effective tax rate in 2012 – excluding the impairment loss on intangibles of €2,106 million – was affected by several adjustments relating to prior years. In addition, the geographical mix of taxable income affected the tax charge.

The impact of non-refundable withholding tax on the tax rate is dependent on our relative share in the profit of subsidiaries in countries that levy withholding tax on dividends and on the timing of the remittance of such dividends. This impact is expected to increase in the coming years. Based on the Dutch tax system there is only a limited credit for such taxes. The tax rate for 2012 was impacted by an anticipated extraordinary dividend that was received in 2013.

Income tax recognized directly in equity

 

 

 

 

 

In € millions

 

2012

 

2013

 

 

 

 

 

Current tax for

 

 

 

 

Currency exchange differences on intercompany loans of a permanent nature

 

4

 

(7)

 

 

4

 

(7)

 

 

 

 

 

Deferred tax for

 

 

 

 

Share-based compensation

 

 

3

Hedge accounting

 

(1)

 

Currency exchange differences on intercompany loans of a permanent nature

 

2

 

Post-retirements benefits

 

249

 

(64)

 

 

250

 

(61)

Total

 

254

 

(68)

Unrecognized deferred tax assets

 

 

 

 

 

In € millions

 

2012

 

2013

Capital losses

 

267

 

Tax losses

 

21

 

41

Deductible temporary differences

 

190

 

135

Total

 

478

 

176

Deferred tax assets and liabilities

In the deferred tax asset for other provisions (€263 million), an amount of €141 million (2012: €189 million) is related to interest expense carried forward. From the total amount of recognized net deferred tax assets, €916 million (2012: €827 million) is related to entities that have suffered a loss in either 2013 or 2012 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.

The loss carryforward recognized in the balance sheet and its usage will have a decreasing impact on the cash tax rate in coming years.

Expiration year of loss carryforwards recognized in the balance sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

2014

 

2015

 

2016

 

2017

 

2018

 

Later

 

Unlimited

 

Total

Total loss carryforwards

 

18

 

27

 

44

 

86

 

59

 

202

 

2,318

 

2,754

Loss carryforwards not recognized in deferred tax assets

 

(12)

 

(19)

 

(29)

 

(36)

 

(45)

 

(6)

 

(20)

 

(167)

Total recognized

 

6

 

8

 

15

 

50

 

14

 

196

 

2,298

 

2,587

Movement in deferred tax in 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

Net balance January 1, 2012

 

Changes in ex-
change rates

 

Acqui-
sitions/ divest-
ments

 

Recog-
nized in income

 

Recog-
nized in equity

 

Held for Sale

 

Net balance December 31, 2012

 

Assets

 

Liabilities

Intangible assets

 

(701)

 

12

 

(6)

 

65

 

 

83

 

(547)

 

71

 

618

Property, plant and equipment

 

(94)

 

 

10

 

28

 

 

9

 

(47)

 

84

 

131

Inventories

 

29

 

 

 

 

 

(5)

 

24

 

27

 

3

Trade and other receivables

 

14

 

 

 

9

 

 

(2)

 

21

 

26

 

5

Share-based payments

 

12

 

 

 

3

 

 

 

15

 

15

 

Post-retirement benefit provisions

 

176

 

(7)

 

 

(164)

 

316

 

(25)

 

296

 

606

 

310

Restructuring provisions

 

15

 

 

 

14

 

 

(2)

 

27

 

28

 

1

Other provisions

 

313

 

(4)

 

 

(25)

 

 

(7)

 

277

 

320

 

43

Other items

 

178

 

(2)

 

 

9

 

 

(4)

 

181

 

214

 

33

Net operating loss carryforwards

 

839

 

(1)

 

(1)

 

105

 

1

 

 

943

 

943

 

Deferred tax assets not recognized

 

(415)

 

9

 

1

 

(6)

 

(67)

 

 

(478)

 

(478)

 

Tax assets/liabilities

 

366

 

7

 

4

 

38

 

250

 

47

 

712

 

1,856

 

1,144

Set-off of tax

 

 

 

 

 

 

 

 

(710)

 

(710)

Net deferred taxes

 

366

 

7

 

4

 

38

 

250

 

47

 

712

 

1,146

 

434

Movement in deferred tax in 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

Net balance January 1, 2013

 

Changes in ex-
change rates

 

Acqui-
sitions/ divest-
ments

 

Recog-
nized in income

 

Recog-
nized in equity

 

Held for Sale

 

Net balance December 31, 2013

 

Assets

 

Liabilities

Intangible assets

 

(547)

 

35

 

 

10

 

 

9

 

(493)

 

88

 

581

Property, plant and equipment

 

(47)

 

7

 

 

(13)

 

 

1

 

(52)

 

66

 

118

Inventories

 

24

 

(1)

 

(3)

 

16

 

 

1

 

37

 

40

 

3

Trade and other receivables

 

21

 

(2)

 

(1)

 

(5)

 

 

 

13

 

20

 

7

Share-based payments

 

15

 

 

 

(1)

 

3

 

 

17

 

17

 

Post-retirement benefit provisions

 

296

 

(1)

 

(8)

 

(109)

 

4

 

 

182

 

279

 

97

Restructuring provisions

 

27

 

(1)

 

 

 

 

 

26

 

26

 

Other provisions

 

277

 

(11)

 

(7)

 

(12)

 

 

 

247

 

263

 

16

Other items

 

181

 

(4)

 

(4)

 

27

 

 

 

200

 

252

 

52

Net operating loss carryforwards

 

943

 

(20)

 

 

(242)

 

 

 

681

 

681

 

Deferred tax assets not recognized

 

(478)

 

2

 

 

368

 

(68)

 

 

(176)

 

(176)

 

Tax assets/liabilities

 

712

 

4

 

(23)

 

39

 

(61)

 

11

 

682

 

1,556

 

874

Set-off of tax

 

 

 

 

 

 

 

 

(485)

 

(485)

Net deferred taxes

 

712

 

4

 

(23)

 

39

 

(61)

 

11

 

682

 

1,071

 

389