Note 15. Income tax expense

This item includes current income tax expense as well as income/expense from deferred taxes (changes in deferred tax assets and deferred tax liabilities) and comprises the following:

The item “Change in capitalized loss carryforwards” relates to the utilization of loss carryforwards in the amount of EUR 2,439 thousand (2022: EUR 566 thousand) and an adjustment to deferred tax assets for loss carryforwards not yet utilized amounting to EUR minus 48,752 thousand (2022: EUR minus 6,344 thousand).

The reconciliation of calculated income tax expense based on the Austrian corporate tax rate of 24 percent (December 31, 2022: 25 percent) to effective income tax expense is shown in the following table:

As in the previous year, the ratio of effective income tax expense to earnings before tax is disproportionate in the 2023 financial year. The Group reports a high level of reconciliation items arising from write-downs on tax assets (in particular from non-capitalized loss carryforwards) (in particular tax group Austria, Indonesia, China, and Thailand). In addition, as in the 2022 financial year, a distribution to hybrid capital holders was realized that is tax deductible. Taxes from previous periods include a provision for uncertain tax items of EUR 13,201 thousand (December 31, 2022: EUR 0 thousand) in connection with regular tax audit procedures.

The “Changes in tax rates” item in the 2023 financial year, as in the 2022 financial year, mainly comprises the statutory tax rate reduction in Austria and the tax rate increase in the Czech Republic. The income tax rate in Austria was gradually reduced from 25 percent to 24 percent with effect from January 1, 2023 and will be reduced from 24 percent to 23 percent with effect from January 1, 2024. This resulted in tax expense of EUR 3,102 thousand in the 2023 financial year (2022: income of EUR 5,224 thousand) from the measurement of the Austrian group companies’ deferred tax assets and deferred tax liabilities. The corporate income tax rate in the Czech Republic will be raised from 19 percent to 21 percent from January 1, 2024. This resulted in tax expense of EUR 1,221 thousand in the 2023 financial year from the measurement of deferred tax assets and deferred tax liabilities.

The “Taxes from prior periods” item includes an additional tax claim of EUR 4,490 (2022: tax credit of EUR 2,660 thousand) from the tax group with the B&C Group (see also note 38).

Lenzing AG and the Austrian subsidiaries of the Lenzing Group are subject to an income tax rate of 24 percent (December 31, 2022: 25 percent). The income tax rates for foreign companies range from 9.9 percent to 34 percent (December 31, 2022: from 11 percent to 34 percent).

The OECD model rules for a global minimum taxation system (Pillar 2) were published in December 2021. The minimum taxation regime is intended to ensure that corporate groups with worldwide revenue of at least EUR 750,000 thousand are subject to an effective tax burden of at least 15 percent in those countries where they operate. In December 2022, Council Directive (EU) 2022/2523 was adopted to ensure an overall minimum level of taxation for multinational enterprise groups and large domestic groups within the EU, which was transposed into national law in Austria with the Minimum Tax Reform Act of December 30, 2023 and is to be applied by taxpayers from January 1, 2024. Numerous jurisdictions relevant to the Lenzing Group are currently introducing corresponding minimum tax regulations. As the new tax laws have not entered into force as at December 31, 2023, neither in Austria nor in any other jurisdiction relevant to the Lenzing Group, no impact arises in relation to the actual tax expense for the 2023 financial year.

B&C Privatstiftung, Vienna, is the ultimate parent company of Lenzing AG and its subsidiaries for the purposes of the minimum taxation rules. In accordance with minimum taxation rules, Lenzing AG is a partially owned parent company.

An evaluation of the effects of the new minimum taxation rules for the Lenzing Group as a subgroup of the B&C Group was conducted. From today’s perspective, the temporary safe harbor regulations and the minimum tax calculation do not have a material impact on the recognition and measurement of tax assets and liabilities in a stand-alone analysis of the Lenzing Group subgroup for either 2023 or 2024.

The Lenzing Group applies the temporary, mandatory exemption with regard to the recognition of deferred taxes arising from the introduction of global minimum taxation and recognizes these as current tax expense/income when they arise. The mandatory exception must be applied retrospectively. However, as no new legislation introducing global minimum taxation was in force as at December 31, 2022, in any of the countries where the Lenzing Group is active, and no related deferred taxes were recognized as at that date, the retrospective application has no impact on the consolidated financial statements.