The effective corporate income tax charge comprises the following:
|€ x 1,000||€ x 1,000||%||%|
|Taxes based on the weighted average applicable rate||16,141||12,790||25.7||25.0|
|Benefits from tax facilities||-1||-147||0.0||-0.3|
|Deferred tax assets not carried forward||1,417||861||2.3||1.7|
|Derecognition of deferred tax assets||350||186||0.6||0.4|
|Recognition of deferred tax assets||-17,396||-22,942||-27.7||-44.9|
|Adjustment of current taxes of prior years||133||-658||0.2||-1.3|
|Adjustment of deferred taxes of prior years||-648||-||-1.0||0.0|
|Adjustment in tax rate||-2,174||-394||-3.5||-0.8|
The effective tax rate consists of the reported tax charge for the current year, divided by the profit before taxes. The effective tax rate in 2020 amounted to -3.0% (2019: -16.1%). The calculated weighted average tax rate of 25.7% declined to the effective tax rate of -3.0% primarily due to the recognition of the deferred tax assets of € 17.4 million (-27.7%). In 2020, € 16.2 million was added to the deferred tax asset for the application of the Dutch liquidation loss facility (2019: € 21.4 million) with regard to the US business. See note 4.15.2 for more details on the recognition of the deferred tax assets.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are met.
|€ x 1,000||€ x 1,000|
|Deferred tax assets||38,450||25,848|
|Deferred tax liabilities||-15,909||-16,794|
The movement in the deferred tax assets was as follows:
|Loss carry forwards consolidated companies||Financial instruments||Net defined benefit obligation||Other long-term employee benefits||Trademark valuation||Other deferred taxes||Total deferred tax assets|
|€ x 1,000||€ x 1,000||€ x 1,000||€ x 1,000||€ x 1,000||€ x 1,000||€ x 1,000|
|Outgoing business combinations||-53||-||-||-||-||-||-53|
|Charged through other comprehensive income||-||144||179||-||-||-||323|
|Charged through income statement||23,012||-||-43||83||-||-150||22,902|
|Change in income tax rate||-||-||-||-||-||-||-|
|Transfer from/to current tax||-||-||-||-||-||-||-|
|Currency translation differences||-3||-||-||-15||-||-2||-20|
|Outgoing business combinations||-||-||-||-||-||-||-|
|Charged through other comprehensive income||-||2,361||63||-||-||-||2,424|
|Charged through income statement||7,347||-||-68||-34||595||1,817||9,657|
|Change in income tax rate||2,567||-||-||-||-||-||2,567|
|Transfer from/to current tax||-2,430||-||-||-||-||-||-2,430|
|Currency translation differences||3||-||-||-52||-||-54||-103|
The movement in the deferred tax liabilities was as follows:
|Revaluation of property, plant and equipment||Financial instruments||Trademark valuation and customer lists||Net defined benefit asset||Other deferred taxes||Total deferred tax liabilities|
|€ x 1,000||€ x 1,000||€ x 1,000||€ x 1,000||€ x 1,000||€ x 1,000|
|Added through business combination||-||-||-||-||467||467|
|Charged through other comprehensive income||-||881||-||-325||-||556|
|Charged through income statement||386||-||670||-222||350||1,184|
|Change in income tax rate||-||-||394||-||-||394|
|Transfer from/to current tax||-||-||-||-||-||-|
|Currency translation differences||6||-||-63||-397||-19||-473|
|Added through business combinations||-||-||-||-||-||-|
|Charged through other comprehensive income||-||-||-||112||-||112|
|Charged through income statement||-3||-||1,142||-99||-16||1,024|
|Change in income tax rate||-||-||-386||-||-||-386|
|Transfer from/to current tax||-||-||-||-||-||-|
|Currency translation differences||-7||-||-||461||5||459|
Deferred tax assets and deferred tax liabilities are offset for the right-of-use assets and lease liabilities.
Unrecognised tax assets
For some subsidiaries Accell Group has insufficient assurance that future taxable profits will be available to realise the related tax benefits of carry forward losses of € 44.7 million (2019: € 45.5 million). As a result, no deferred tax assets are recognised for these carry forward losses. These unused carry forward losses are mainly carry forward losses in the United Kingdom and are partly related to the global results of the Raleigh group before the acquisition by Accell Group in 2012. The carry forward period of these unused tax benefits is 30 years for € 0.2 (2019: € 1.1 million) and indefinite for € 44.5 million (2019: € 44.4 million).
Recognised tax assets
The Group has recognised deferred tax assets for tax loss carry-forwards in several jurisdictions for the total amount of € 31.5 million (2019: € 23.9 million). The main jurisdiction in this respect is the Netherlands € 29.7 million.
In 2019, Accell Group reached agreement with a private equity firm on the sale of its loss-making US business, Accell North America Inc. and Accell North America was liquidated on 27 October 2020. Accell Group incurred a liquidation loss of € 160.5 million. Accell Group currently expects qualification for the requirements of the Dutch liquidation loss facility. Due to the increased profitability of the Dutch fiscal unity management considers it probable that future taxable profits will be available against which these losses can be used, based on the business plans, profitability gained in the past and current estimates of future taxable profits. Therefore, management recognised the full taxable effect in 2020 which had a positive impact of € 16.2 million. This results, after deduction of taxable profits, in a deferred tax asset of € 29.7 million (2019: € 21.4 million).
The Dutch corporate income tax rate has increased from 21.7% to 25.0% for the years 2021 and 2022. This new legislation means that deferred tax assets for loss carry-forwards as per 31 December 2020 have been revalued, with an additional positive impact of € 2.6 million.
The Dutch tax loss carry-forwards as per 31 December 2020 amounted to € 118.7 million (2019: € 150.8 million of which € 95.5 million was recognised).
Accounting estimates and judgements
The tax legislation in the countries in which Accell Group operates is often complex and subject to interpretation. Judgement is required to determine the current and deferred income tax position. New information may become available that causes Accell Group to change its judgement regarding the adequacy of existing tax liabilities and the recoverability of deferred tax assets; such changes will impact the income tax expense in the period that such a determination is made.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
- temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that Accell Group is not able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future;
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which Accell Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met.