9. Income tax
(in millions of euros) | 2021 | 2020 |
Recognised in the income statement | ||
Current income tax | 12 | -5 |
Deferred income tax | 355 | -112 |
Total income tax | 367 | -117 |
Reconciliation with effective tax rate | ||
Profit before tax | 133 | -2,464 |
Income tax at Dutch tax rate for corporation tax (2021 and 2020: 25%) | -33 | 616 |
Participation exemption | 1 | - |
Addition of mixed costs, investment credit, etc. | -1 | - |
Non-recognition of losses in the current financial year | -12 | - |
Write-down of deferred tax assets | -8 | -574 |
Recognition of deferred tax assets | 367 | - |
Permanent difference: Termination payments/net asset payments | 86 | -116 |
Effect of the tax rate in foreign jurisdictions (different rate) | 25 | -26 |
Permanent difference: Non-deductible write-down and provisions in Germany | -75 | -17 |
Changes in rates for deferred tax positions | 17 | - |
Total income tax | 367 | -117 |
Income tax on income and expenses recognised in the other comprehensive income | -5 | - |
The corporate income tax is calculated on the basis of the applicable tax rates in the Netherlands, the United Kingdom and Germany (up to 30 June 2021), taking into account the tax provisions that give rise to permanent differences between the profit determination for commercial and tax purposes. The tax provisions include the participation exemption and the limitation of deductible expenses.
The effective tax burden on the profit before corporate income tax was -276% (2020: -5%). This low effective tax burden compared to the nominal tax burden is mainly caused by:
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The write-offs and provisions recorded in Germany as a result of the settlement of the insolvency proceedings are largely expected to be non-deductible for corporate income tax purposes and have been treated as a permanent difference.
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In 2020, the reserved termination payments in the United Kingdom that pertain to the ERMA contracts have been classified as a permanent difference. This also applies to the release of a major part of this reserve in 2021 (€86 million). For the part that has been paid, an assessment has been made of the tax deductibility and a receivable has been recognised for an amount of €17 million under measurement of deferred receivables.
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As a consequence of the amended tax regulations in the Netherlands, losses can be carried forward indefinitely. In the Netherlands, this resulted in an upward revaluation of the deferred receivables amounting to €367 million.
For the Dutch fiscal unity, the tax returns up to and including 2018 are agreed upon with the Tax Administration. A final assessment has been received for 2018, but not yet for the following years. In the financial statements of previous years and of this year, the tax has been recognised on the basis of the returns submitted up to and including 2020 and the assumptions made therein, as well as any corrections to previous years.
Measurement basis
Tax on profit or loss for the reporting period includes profit taxes payable and receivable for the reporting period and deferred profit taxes. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity through other comprehensive income, in which case it is recognised in equity through other comprehensive income. All tax items are recognised at nominal value.
Tax that is payable and available for set-off in respect of the financial year is the expected tax payable on the taxable profit for the reporting period, calculated using tax rates prevailing at the balance sheet date, and any adjustments to tax payable in respect of previous years.
Almost all subsidiaries belonging to the Group are included in the NS fiscal unity for corporate income tax purposes, with the exception of foreign group companies.