Income tax
The income tax expense on the total result was €194 million, which represents an effective income tax rate of 17.0% ( 2017: €115 million, representing an effective income tax rate of 15.5%) and can be broken down as follows:
|
2018
|
2017
|
|
|
Current tax expense:
|
||
|
- Current year
|
(162)
|
(78)
|
|
- Prior-year adjustments
|
3
|
(4)
|
|
- Tax credits compensated
|
4
|
2
|
|
- Non-recoverable withholding tax
|
(1)
|
(1)
|
|
(156)
|
(81)
|
|
|
Deferred tax expense:
|
||
|
- Originating from temporary differences and their reversal
|
23
|
(19)
|
|
- Prior-year adjustments
|
4
|
2
|
|
- Change in tax rate
|
(8)
|
25
|
|
- Changes arising from (reversal of) write-down deferred tax assets
|
(8)
|
9
|
|
- Other changes in tax losses and tax credits
|
(49)
|
(51)
|
|
(38)
|
(34)
|
|
|
Total
|
(194)
|
(115)
|
|
Of which related to:
|
||
|
- Adjusted taxable result
|
(217)
|
(143)
|
|
- APM adjustments
|
23
|
28
|
The effective tax rate on the Adjusted taxable result was 17.4% in 2018 (2017: 16.8%). The effective tax rate in 2017 was positively impacted by the adjusted federal tax rate in the US. The effective tax rate in 2018 was positively impacted by the geographical spread. The relationship between the income tax rate in the Netherlands and the effective tax rate on the result is as follows:
Effective tax rate
|
in %
|
2018
|
2017
|
|
Domestic income tax rate
|
25.0
|
25.0
|
|
Tax effects of:
|
||
|
- Deviating rates
|
(8.0)
|
(4.6)
|
|
- Change in tax rates
|
0.7
|
(3.0)1
|
|
- Tax-exempt income and non-deductible expense
|
(0.9)
|
(0.5)
|
|
- Other effects
|
0.6
|
(0.1)
|
|
Effective tax rate adjusted result
|
17.4
|
16.8
|
|
APM adjustments (see Note 2)
|
(0.4)
|
(1.3)
|
|
Total effective tax rate
|
17.0
|
15.5
|
1 Change due to US tax reform only
In Change in tax rates of 0.7%, the impact of the measurement and/or remeasurement of the deferred tax assets and liabilities (caused by the tax reform in the Netherlands and other European countries) is included. The change in tax rate in 2017 was related to the impact of the US tax reform only.
The balance of deferred tax assets and deferred tax liabilities decreased by €28 million owing to the changes presented in the next table:
Deferred tax assets and liabilities
|
2018
|
2017
|
|
|
Balance at 1 January
|
||
|---|---|---|
|
Deferred tax assets
|
281
|
355
|
|
Deferred tax liabilities
|
(259)
|
(278)
|
|
Total
|
22
|
77
|
|
Changes:
|
||
|
- Income tax income/(expense) in income statement
|
(30)
|
(59)
|
|
- Income tax: change in tax percentage
|
(8)
|
25
|
|
Income tax expense
|
(38)
|
(34)
|
|
- Income tax: sale of Patheon
|
-
|
(22)
|
|
Total income statement
|
(38)
|
(56)
|
|
- Income tax expense in OCI
|
20
|
(25)
|
|
- Acquisitions and disposals
|
(17)
|
(5)
|
|
- Other consolidation changes
|
3
|
-
|
|
- Exchange differences
|
-
|
22
|
|
- Transfer
|
4
|
9
|
|
Balance at 31 December
|
(6)
|
22
|
|
Of which:
|
||
|
- Deferred tax assets
|
248
|
281
|
|
- Deferred tax liabilities
|
(254)
|
(259)
|
In various countries, DSM has taken standpoints regarding its tax position which may at any time be challenged, or have already been challenged, by the tax authorities, because the authorities in question interpret the law differently. These uncertainties are taken into account in determining the probability of realization of deferred tax assets and liabilities.
The deferred tax assets and liabilities relate to the following balance sheet items:
Deferred tax assets and liabilities by balance sheet item
|
2018
|
2017
|
|||
|
Deferred tax assets
|
Deferred tax liabilities
|
Deferred tax assets
|
Deferred tax liabilities
|
|
|
Intangible assets
|
12
|
(161)
|
14
|
(152)
|
|
Property, plant and equipment
|
21
|
(166)
|
22
|
(159)
|
|
Financial assets
|
3
|
(10)
|
9
|
(8)
|
|
Inventories
|
64
|
(34)
|
53
|
(33)
|
|
Receivables
|
8
|
(14)
|
5
|
(17)
|
|
Equity
|
1
|
(1)
|
1
|
(1)
|
|
Other non-current liabilities
|
14
|
(3)
|
19
|
(1)
|
|
Non-current provisions
|
77
|
(2)
|
74
|
(3)
|
|
Other current liabilities
|
87
|
(5)
|
70
|
(12)
|
|
287
|
(396)
|
267
|
(386)
|
|
|
Tax losses carried forward
|
103
|
-
|
141
|
-
|
|
Set-off
|
(142)
|
142
|
(127)
|
127
|
|
Total
|
248
|
(254)
|
281
|
(259)
|
No deferred tax assets were recognized for loss carryforwards amounting to €237 million (2017: €211 million). Unrecognized loss carryforwards amounting to €58 million will expire in the years up to and including 2023 (2017: €77 million up to and including 2022), €112 million between 2024 and 2028 (2017: €72 million between 2023 and 2027) and the remaining €67 million between 2029 and beyond (2017: €63 million between 2028 and 2032).
The valuation of deferred tax assets depends on the probability of the reversal of temporary differences and the utilization of tax loss carryforwards. Deferred tax assets are recognized for future tax benefits arising from temporary differences and for tax loss carryforwards to the extent that the tax benefits are likely to be realized. In the Netherlands, tax losses may be carried forward for six years. DSM has to assess the likelihood that deferred tax assets will be recovered from future taxable profits. Deferred tax assets are reduced if, and to the extent that, it is not probable that all or some portion of the deferred tax assets will be realized. In the event that actual future results differ from estimates, and depending on tax strategies that DSM may be able to implement, changes to the measurement of deferred taxes could be required, which could impact on the company's financial position and profit for the year.