Note 6: Income tax

Pre-tax income from continued operations amounted to a profit of €852 million (2013: €772 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

 

2013

 

2014

 

 

 

 

 

Current tax expense for

 

 

 

 

The year

 

(147)

 

(244)

Adjustments for prior years

 

6

 

(8)

 

 

(141)

 

(252)

 

 

 

 

 

Deferred tax expense for

 

 

 

 

Origination and reversal of temporary differences and tax losses

 

(74)

 

(7)

(De)recognition of deferred tax assets

 

97

 

8

Changes in tax rates

 

7

 

(1)

 

 

30

 

Total

 

(111)

 

(252)

The total tax charge, including discontinued operations, was €247 million (2013: €69 million).

Effective tax rate reconciliation

The effective income tax rate based on the Consolidated statement of income is 29.6 percent. The tax line is impacted by the release of a deferred tax liability due to organizational restructuring, offset by the de-recognition of operating losses and tax credits. In addition, the geographical mix of taxable income affected the tax charge. The effective tax rate in 2013 included a non-cash gain as a result of the recognition of €124 million of previously unrecognized deferred tax assets and several non-taxable items.

Effective consolidated tax rate

 

 

 

 

 

in %

 

2013

 

2014

Corporate tax rate in the Netherlands

 

25.0

 

25.0

Effect of tax rates in other countries

 

5.7

 

0.4

Weighted average statutory income tax rate

 

30.7

 

25.4

Non-taxable (income)/expenses

 

(3.7)

 

0.3

(De)recognition of deferred tax assets

 

(12.4)

 

(0.9)

Non-refundable withholding taxes

 

1.5

 

3.6

Other

 

(1.7)

 

1.2

Effective consolidated tax rate

 

14.4

 

29.6

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 as a consequence of geomix developments. Based on the Dutch tax system there is a limited credit for such taxes.

Deferred tax assets and liabilities

In the net deferred tax asset for other provisions (€162 million), an amount of €38 million is related to interest expense carried forward. From the total amount of recognized net deferred tax assets, €967 million (2013: €916 million) is related to entities that have suffered a loss in either 2014 or 2013 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.

Income tax recognized in equity

Income tax is recognized on items recorded in Other comprehensive income only when they are taxable. In case this results in deferred tax assets, these are only recognized to the extent that it is probable that future taxable profits will be available against which they can be utilized.

Income tax recognized directly in equity

 

 

 

 

 

In € millions

 

2013

 

2014

 

 

 

 

 

Current tax for

 

 

 

 

Currency exchange differences on intercompany loans of a permanent nature

 

(7)

 

(16)

 

 

 

 

 

Deferred tax for

 

 

 

 

Share-based compensation

 

3

 

Post-retirement benefits

 

(64)

 

34

 

 

(61)

 

34

Total

 

(68)

 

18

Unrecognized deferred tax assets

 

 

 

 

 

In € millions

 

2013

 

2014

Capital losses

 

 

4

Tax losses and tax credits

 

41

 

135

Deductible temporary differences

 

135

 

249

Total

 

176

 

388

Expiration year of loss carryforwards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

2015

 

2016

 

2017

 

2018

 

2019

 

Later

 

Unlimited

 

Total

Total loss carryforwards

 

38

 

45

 

131

 

60

 

57

 

444

 

2,639

 

3,414

Loss carryforwards not recognized in deferred tax assets

 

(8)

 

(24)

 

(50)

 

(35)

 

(31)

 

(17)

 

(74)

 

(239)

Total recognized

 

30

 

21

 

81

 

25

 

26

 

427

 

2,565

 

3,175

Movement in deferred tax in 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

Net balance January 1, 2013

 

Changes in ex-
change rates

 

Recog-
nized in income

 

Recog-
nized in equity

 

Other changes

 

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

Post-retirement benefit provisions

 

296

 

(1)

 

(109)

 

4

 

(8)

 

182

 

279

 

97

Other provisions

 

304

 

(12)

 

(12)

 

 

(7)

 

273

 

289

 

16

Other items and tax credits

 

241

 

(7)

 

37

 

3

 

(7)

 

267

 

329

 

62

Tax loss carryforwards

 

943

 

(20)

 

(242)

 

 

 

681

 

681

 

Deferred tax assets not recognized

 

(478)

 

2

 

368

 

(68)

 

 

(176)

 

(176)

 

Tax assets/liabilities

 

712

 

4

 

39

 

(61)

 

(12)

 

682

 

1,556

 

874

Set-off of tax

 

 

 

 

 

 

 

(485)

 

(485)

Net deferred taxes

 

712

 

4

 

39

 

(61)

 

(12)

 

682

 

1,071

 

389

Movement in deferred tax in 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

Net balance January 1, 2014

 

Changes in ex-
change rates

 

Recog-
nized in income

 

Recog-
nized in equity

 

Other changes

 

Net balance December 31, 2014

 

Assets

 

Liabilities

Intangible assets

 

(493)

 

(29)

 

180

 

 

(10)

 

(352)

 

86

 

438

Property, plant and equipment

 

(52)

 

(1)

 

15

 

 

(1)

 

(39)

 

82

 

121

Post-retirement benefits provisions

 

182

 

11

 

(64)

 

138

 

 

267

 

348

 

81

Other provisions

 

273

 

21

 

(132)

 

 

 

162

 

175

 

13

Other items and tax credits

 

267

 

(2)

 

41

 

 

(1)

 

305

 

479

 

174

Tax loss carryforwards

 

681

 

53

 

51

 

 

 

785

 

785

 

Deferred tax assets not recognized

 

(176)

 

(17)

 

(91)

 

(104)

 

 

(388)

 

(388)

 

Tax assets/liabilities

 

682

 

36

 

 

34

 

(12)

 

740

 

1,567

 

827

Set-off of tax

 

 

 

 

 

 

 

(415)

 

(415)

Net deferred taxes

 

682

 

36

 

 

34

 

(12)

 

740

 

1,152

 

412