Note 8: Income tax

Pre-tax income from continuing operations amounted to a profit of €573 million (2017: €764 million). The net tax charges related to continuing operations are included in the statement of income as follows:

The total deferred tax charge, including discontinued operations was €143 million (2017: €182 million). The total tax charge, including discontinued operations, was €549 million (2017: €422 million).

Effective tax rate reconciliation

The effective income tax rate based on the statement of income is 20.6%.

For comparison reasons, the above table presents the effective consolidated tax rate excluding the impact of results on discontinued operations. Including these results, the effective consolidated tax rate is 7.5%, as the deal result is largely tax exempted, refer to Note 2.

The benefits arising from previously unrecognized tax losses, tax credit or temporary differences of a prior period that are used to reduce the current tax expense in 2018 amounted to €25 million and to reduce the deferred tax expense to €20 million. These mainly related to the separation of the Specialty Chemicals business.

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 adjustments for prior years are mainly related to the outcome of several tax audits.

Deferred tax assets and liabilities

From the total amount of recognized net deferred tax assets, €393 million (2017: €280 million) is related to entities that have suffered a loss in either 2018 or 2017 and where utilization is dependent on future taxable profit in excess of the profit arising from the reversal of existing taxable temporary differences. This assessment is based on management’s long-term projections and tax planning strategies.

A deferred tax liability is recognized for taxable temporary differences related to investments in subsidiaries, branches and associates and interests in joint arrangements, to the extent that it is probable that these will reverse in the foreseeable future. The expected net tax impact of the remaining differences for which no deferred tax liabilities have been recognized is €30 million.

The income tax recognized in equity in 2017 includes the impact of a derecognition and in 2018 of a rerecognition of certain post-retirement benefits related deferred tax assets.