Note 6: Income tax

Pre-tax income from continuing operations amounted to a profit of €1,476 million (2014: €852 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

 

2014

 

2015

 

 

 

 

 

Current tax expense for

 

 

 

 

The year

 

(244)

 

(332)

Adjustments for prior years

 

(8)

 

27

Total current tax expense

 

(252)

 

(305)

 

 

 

 

 

Deferred tax expense for

 

 

 

 

Origination and reversal of temporary differences and tax losses

 

(7)

 

(82)

(De)recognition of deferred tax assets

 

8

 

(20)

Changes in tax rates

 

(1)

 

(9)

Total deferred tax expense

 

 

(111)

Total

 

(252)

 

(416)

The total deferred tax charge, including discontinued operations was €109 million (2014: € nil). The total tax charge, including discontinued operations, was €407 million (2014: €247 million).

Effective tax rate reconciliation

The effective income tax rate based on the Consolidated statement of income is 28.2 percent.

Effective tax rate

 

 

 

 

 

In %

 

2014

 

2015

Corporate tax rate in the Netherlands

 

25.0

 

25.0

Effect of tax rates in other countries

 

0.4

 

1.9

Weighted average statutory income tax rate

 

25.4

 

26.9

Non-taxable (income)/expenses

 

0.3

 

0.4

(De)recognition of deferred tax assets

 

(0.9)

 

1.4

Non-refundable withholding taxes

 

3.6

 

0.7

Other

 

1.2

 

(1.2)

Effective tax rate

 

29.6

 

28.2

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. Based on the Dutch tax system there is a limited credit for such taxes. The high impact in 2014 was caused by relatively high expected dividends.

Deferred tax assets and liabilities

From the total amount of recognized net deferred tax assets, €496 million (2014: €967 million) is related to entities that have suffered a loss in either 2015 or 2014 and where utilization is dependent on future taxable profit in excess of the profit arising from the reversal of existing taxable temporary differences.

The usage of the tax loss carryforwards recognized in the balance sheet will affect the cash tax rate in coming years.

Income tax recognized in equity

 

 

 

 

 

In € millions

 

2014

 

2015

Currency exchange differences on intercompany loans of a permanent nature

 

(16)

 

2

Cash flow hedges

 

 

7

Share-based compensation

 

 

(1)

Post-retirement benefits

 

34

 

(2)

Total

 

18

 

6

 

 

 

 

 

Current tax

 

(16)

 

Deferred tax

 

34

 

6

Total

 

18

 

6

Unrecognized deferred tax assets

 

 

 

 

 

In € millions

 

2014

 

2015

Tax losses and tax credits

 

139

 

165

Deductible temporary differences

 

249

 

267

Total

 

388

 

432

Expiration year of loss carryforwards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

2016

 

2017

 

2018

 

2019

 

2020

 

Later

 

Unlimited

 

Total

Total loss carryforwards

 

53

 

146

 

61

 

63

 

63

 

644

 

2,964

 

3,994

Loss carryforwards not recognized in deferred tax assets

 

(36)

 

(71)

 

(46)

 

(38)

 

(48)

 

(16)

 

(44)

 

(299)

Total recognized

 

17

 

75

 

15

 

25

 

15

 

628

 

2,920

 

3,695

Movement in deferred tax in 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

Net balance January 1, 2014

 

Changes in exchange rates

 

Recog­nized in income

 

Recog­nized in equity

 

Other

 

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 benefit 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

Movement in deferred tax in 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In € millions

 

Net balance January 1, 2015

 

Changes in exchange rates

 

Recog­nized in income

 

Recog­nized in equity

 

Other

 

Net balance December 31, 2015

 

Assets

 

Liabilities

Intangible assets

 

(352)

 

7

 

(9)

 

 

 

(354)

 

61

 

415

Property, plant and equipment

 

(39)

 

1

 

 

 

(1)

 

(39)

 

78

 

117

Post-retirement benefit provisions

 

267

 

13

 

(91)

 

5

 

 

194

 

310

 

116

Other provisions

 

162

 

10

 

(36)

 

 

(1)

 

135

 

159

 

24

Other items and tax credits

 

305

 

1

 

13

 

13

 

 

332

 

396

 

64

Tax loss carryforwards

 

785

 

44

 

38

 

(6)

 

 

861

 

861

 

Deferred tax assets not recognized

 

(388)

 

(14)

 

(24)

 

(6)

 

 

(432)

 

(432)

 

Tax assets/liabilities

 

740

 

62

 

(109)

 

6

 

(2)

 

697

 

1,433

 

736

Set-off of tax

 

 

 

 

 

 

 

(376)

 

(376)

Net deferred taxes

 

740

 

62

 

(109)

 

6

 

(2)

 

697

 

1,057

 

360