5. Taxation
Note 5.1 Income tax in the consolidated statement of profit or loss
Accounting policies |
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Income tax recognised in profit or loss comprises current tax and deferred tax. Current income tax is calculated in accordance with current tax laws. |
Income tax
Note | | 2017 | 2016 |
---|---|---|---|
| Current income tax | 977 | 810 |
5.1.1 | Deferred income tax | ( 117) | ( 125) |
| Tax adjustments for prior periods | (86) | ( 37) |
| Income tax | 774 | 648 |
In 2017, the Group’s entities paid income tax in the amount of PLN 983 million (in 2016: PLN 451 million) to appropriate tax offices.
The table below presents an identification of differences between income tax from profit before tax for the Group and the income tax which could be achieved if the Parent Entity’s tax rate was applied:
Reconciliation of effective tax rate
| 2017 | 2016 |
---|---|---|
Profit/(Loss) before tax | (2 299) | (3 801) |
Tax calculated using the Parent Entity’s rate (2016: 19%, 2015: 19%) | 437 | ( 722) |
Effect of applying other tax rates abroad | ( 177) | ( 470) |
Tax effect of non-taxable income | ( 340) | ( 140) |
Tax effect of expenses not deductible for tax purposes: | 547 | 1 359 |
impairment losses on the KGHM INTERNATIONAL LTD. Group’s assets | 168 | 1 105 |
minerals extraction tax, which is not deductible for corporate income tax purposes | 335 | 254 |
Deductible temporary differences on which deferred tax assets were not recognised | 659 | 619 |
Utilisation of previously-unrecognised tax losses | ( 352) | ( 2) |
Other | - | 4 |
Income tax in profit or loss [effective tax rate amounted to (17.1)% (in 2015: 2.2%) of loss before tax] | 774 | 648 |
In Poland, tax bodies are empowered to audit tax declarations for a period of five years, although during this period companies may offset tax assets with tax liabilities being the income of the State Treasury (including due to current income tax). In Canada, tax declarations may be audited for a period of three years without the right to offset assets with liabilities due to current income tax.
Note 5.1.1 Deferred income tax
Accounting policies | Significant estimates and assumptions |
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Deferred tax is determined using tax rates and tax laws that are expected to be applicable when the asset is realised or the liability is settled based on tax rates and tax laws that have been enacted or substantively enacted at the end of the reporting period. Deferred tax liabilities and deferred tax assets are recognised for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the exception of temporary differences arising from initial recognition of assets or liabilities in transactions other than business combinations. Deferred tax assets are recognised if it is probable that taxable profit will be available against which the deductible temporary differences and unused tax losses can be utilised. Deferred tax assets and deferred tax liabilities are offset if the company has a legally enforceable right to set off current tax assets and current tax liabilities, and if the deferred tax assets and deferred tax liabilities relate to income taxes levied on a given entity by the same tax authority. | The probability of realising the deferred tax assets with future tax income is based on the budgets of the companies of the Group. Companies of the Group recognise deferred tax assets in their accounting books to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Companies of the Group which historically have generated losses, and whose financial projections do not foresee the achievement of taxable profit enabling the deduction of deductible temporary differences, do not recognise deferred tax assets in their accounting books. |
| 2017 | 2016 |
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Net deferred tax liabilities at the beginning of the period, of which: | ( 52) | ( 157) |
Deferred tax assets | 511 | 557 |
Deferred tax liabilities | ( 563) | ( 714) |
Recognised in profit or loss | 117 | 125 |
Recognised in other comprehensive income, due to: | ( 23) | ( 20) |
deferred income tax | ( 55) | 1 |
exchange differences from translation of deferred income tax of foreign operations | 32 | ( 21) |
Deferred income tax at the end of the period, of which: | 42 | ( 52) |
Deferred tax assets | 389 | 511 |
Deferred tax liabilities | ( 347) | ( 563) |
Maturities of deferred tax assets and deferred tax liabilities were as follows:
| Deferred tax assets | Deferred tax liabilities | ||
---|---|---|---|---|
2017 | 2016 | 2017 | 2016 | |
Maturity over the 12 months from the end of the reporting period | 120 | 200 | 329 | 543 |
Maturity of up to 12 months from the end of the reporting period | 269 | 311 | 18 | 20 |
Total | 389 | 511 | 347 | 563 |
Expiry dates of unused tax losses and tax credits, for which deferred tax assets were not recognised in individual countries were presented in the following table:
| 2017 | 2016 | ||||||
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Unused tax losses | Expiry date | Unused tax credits | Expiry date | Unused tax losses | Expiry date | Unused tax credits | Expiry date | |
Luxembourg | 3 619 | 2020 | - | - | 4 384 | 2020 | - | - |
Chile | 924 | undefined | - | - | 1 197 | undefined | - | - |
Canada | 515 | 2032-2037 | 44 | 2015-2021 | 1 206 | 2032-2036 | 53 | 2015-2021 |
Other | 188 | - | 132 | - | 258 | - | 116 | - |
Total | 5 246 | | 176 | | 7 045 | | 169 | |
As at 31 December 2017, the Parent Entity did not recognise deferred tax liabilities on taxable temporary differences in the amount of PLN 1 185 million (as at 31 December 2016: PLN 1 116 million) related to investments in subsidiaries and shares in joint ventures, as the conditions stipulated in IAS 12.39 were met.
Deferred tax assets
1 January 2016 | Credited/(Charged) | 31 December 2016 | Credited/(Charged) | 31 December 2017 | |||||
---|---|---|---|---|---|---|---|---|---|
profit or loss | other comprehensive income | exchange differences from translation of foreign operations | profit or loss | other comprehensive income | exchange differences from translation of foreign operations | ||||
Provision for decommissioning of mines and other technological facilities | 177 | ( 21) | - | - | 156 | 6 | - | - | 162 |
Measurement of forward transactions | 91 | ( 7) | - | - | 84 | - | - | - | 84 |
Difference between the depreciation rates of property, plant and equipment for accounting and tax purposes | 50 | 29 | - | - | 79 | (10) | - | - | 69 |
Future employee benefits | 398 | 2 | ( 21) | - | 379 | 12 | 26 | - | 417 |
Measurement of available-for-sale financial assets | 99 | 11 | - | - | 110 | (2) | - | - | 108 |
Other | 606 | 36 | 31 | 17 | 690 | 3 | ( 31) | ( 23) | 639 |
Total | 1 421 | 50 | 10 | 17 | 1 498 | 9 | (5) | (23) | 1 479 |
Deferred tax liabilities
1 January 2016 | (Credited)/Charged | 31 December 2016 | (Credited)/Charged | 31 December 2017 | |||||
---|---|---|---|---|---|---|---|---|---|
profit or loss | other comprehensive income | exchange differences from translation of foreign operations | profit or loss | other comprehensive income | exchange differences from translation of foreign operations | ||||
Measurement of forward transactions | 33 | 9 | - | - | 42 | - | - | - | 42 |
Re-measurement of hedging instruments | - | - | - | - | - | - | 43 | - | 43 |
Difference between the depreciation rates for accounting and tax purposes | 1 113 | ( 109) | - | 20 | 1 024 | 36 | - | ( 44) | 1 016 |
Adjustments due to fair value measurement of KGHM INTERNATIONAL LTD. and realisation of adjustments to the end of the reporting period | 281 | ( 125) | - | 11 | 167 | ( 148) | - | ( 18) | 1 |
Other | 151 | 150 | 9 | 7 | 317 | 4 | 7 | 7 | 355 |
Total | 1 578 | (75) | 9 | 38 | 1 550 | ( 108) | 50 | ( 55) | 1 437 |
Note 5.2 Other taxes
The following table presents all of the minerals extraction taxes with which the Parent Entity is charged.
2017 | 2016 | Basis for calculating tax | Tax rate | Presentation in the consolidated statement of profit or loss | |
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Minerals extraction tax, of which: | 1 765 | 1 338 | Weighted average tax rate calculated for every reporting period* | Taxes and charges in expenses by nature (note 4.1) | |
- copper | 1 407 | 964 | Amount of copper in produced concentrate, expressed in tonnes | ||
- silver | 358 | 374 | Amount of silver in produced concentrate, expressed in kilogrammes |
* in accordance with conditions specified by the Act dated 2 March 2012 on the minerals extraction tax
The minerals extraction tax paid by the Parent Entity is calculated from the amount of copper and silver in produced concentrate and depends on the prices of these metals as well as on the USD/PLN exchange rate. The tax is accounted for under manufacturing costs of basic products and is not deductible for corporate income tax purposes.
Other taxes and charges, with a breakdown by geographical location, were as follows:
2017 | 2016 | |
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Poland | 456 | 446 |
Real estate tax | 188 | 178 |
Excise tax | 110 | 111 |
Environmental fees | 41 | 40 |
Other taxes and charges | 19 | 29 |
Other countries | 98 | 88 |
Other countries | 44 | 67 |
Total | 500 | 513 |
Note 5.3 Tax assets and liabilities
Accounting policies |
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Tax assets comprise current income tax assets and the settlement related to VAT. Assets not representing financial assets are initially recognised at nominal value and are measured at the end of the reporting period at the amount due. Tax liabilities comprise the Group’s liabilities towards the tax office arising from the corporate income tax, including due to the withholding tax, personal income tax and liabilities towards the Polish Customs Office due to the minerals extraction tax and the excise tax. Liabilities not representing financial liabilities are measured at the amount due. |
2017 | 2016 | |
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Current corporate income tax assets | 41 | 47 |
Assets due to taxes, social and health insurance and other benefits | 236 | 220 |
Tax assets | 277 | 267 |
2017 | 2016 | |
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Current corporate income tax liabilities | 88 | 243 |
Liabilities due to taxes, social and health insurance and other benefits | 542 | 543 |
Tax liabilities | 630 | 786 |