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 capitalization of loss carryforwards in the amount of EUR minus 16,094 thousand and a valuation allowance on deferred tax assets recognized in prior years for loss carryforwards not yet utilized amounting to EUR 47,377 thousand (2023: EUR minus 48,752 thousand). In the 2023 financial year tax loss carryforwards in the amount of EUR 2,439 were utilized.

The reconciliation of calculated income tax expense based on the Austrian corporate tax rate of 23 percent (December 31, 2023: 24 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 2024 financial year. The Group reports significant reconciliation items arising from write-downs on tax assets (in particular from non-capitalized loss carryforwards arising in the Austrian tax group as well as in Indonesia, China, and Thailand). In addition, as in the 2023 financial year, a distribution to hybrid capital holders was realized that is tax deductible.

The “Taxes from prior periods” item includes an additional tax claim of EUR 23,019 thousand (2023: additional tax claim of EUR 4,490 thousand) of the former tax group with the B&C Group (see also notes 29 and 38). This additional tax claim arises from the retroactive withdrawal from the B&C tax group from the 2022 financial year onwards (EUR 22,209 thousand), and from correction of the tax allocation for the 2021 financial year in the amount of EUR 810 thousand. In the 2023 financial year this item included a provision for uncertain tax items of EUR 13,201 thousand in connection with regular tax audit procedures.

Lenzing AG and the Austrian subsidiaries of the Lenzing Group are subject to an income tax rate of 23 percent (December 31, 2023: 24 percent). The income tax rates for foreign companies range from 9.9 percent to 34 percent (December 31, 2023: from 9.9 percent to 34 percent).

The “Changes in tax rates” item in the 2023 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 of January 1, 2023 and from 24 percent to 23 percent with effect of January 1, 2024. This resulted in tax expense of EUR 0 thousand in the 2024 financial year (2023: expense of EUR 3,105 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 was raised from 19 percent to 21 percent from January 1, 2024. This resulted in tax expense of EUR 0 thousand in the 2024 financial (2023: tax expense of EUR 1,221 thousand) year from the measurement of deferred tax assets and deferred tax liabilities.

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 also introduced corresponding minimum tax regulations that are applicable as of January 1, 2024.

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. Due to the temporary safe harbor regulations and based on the minimum tax calculation, no material impact on the recognition and measurement of tax assets and liabilities was identified in a stand-alone analysis of the Lenzing Group subgroup for 2024. Insofar as minimum taxation rules are applied (as things currently stand in Hong Kong and Malta), the financial impact was evaluated for the 2024 financial year (primary supplementary tax in Austria). At EUR 1 thousand, no material effects were identified for the Lenzing Group.

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.