IAS 12, para 81(c), tax reconciliation and additional disclosure of profit and loss and taxation by major country

Alfa Laval AB (publ.) – Annual report – 31 December 2019

Industry: manufacturing

Note 16. Current and deferred taxes (extract 1)
The difference between the tax costs of the group and the tax cost based upon applicable tax rates can be explained as follows:

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Note 16. Current and deferred taxes (extract 2)
The nominal tax rate has changed in the following countries between 2018 and 2019 or will change during 2020.

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The tax rates for 2019 and 2018 have been used to calculate the actual tax each year, while the tax rates for 2020 and 2019 have been used to calculate the deferred tax for 2019 and 2018 respectively.

The Group’s normal effective tax rate is approximately 26 (26) percent based on taxable result, and it is calculated as a weighted average based on each subsidiary’s part of the result before tax. One-time items like the ones mentioned below can however increase the tax rate for an individual year.

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The above table presents the earnings before tax and received dividends, the tax cost and the tax percentage per country for the top ten countries separately and the others grouped under profit generating and loss-making respectively and the consolidation entries in order to arrive at the total. The local results include appropriations. The reason why the result is before received dividends is that these mostly are non-taxable. The top ten countries are defined as the ten countries with the highest tax cost in 2019. The comparison figures 2018 are for these ten countries, although they might not have been among the ten countries with highest tax cost also in 2018.

Observe that individual companies in the top ten countries and in the group with a positive result can report losses. The group with losses can contain individual companies with profits. Also observe that the presented result is without correction for any non-deductible costs and non-taxable revenues outside received tax free dividends. The tax percentage for the U.S. in 2018 has been affected by revaluation of future tax deductions with SEK +130 million.

Companies with losses in countries without tax pooling might have unused tax losses that have not resulted in a corresponding deferred tax asset, since these are not likely to be used. The lack of such a deferred tax income in these cases has an impact on the tax percentage in the concerned countries.