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Note 16. 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:

Income tax expense by source
EUR '000

 

2021

2020

Current income tax expense

 

 

Austria

15,893

5,947

Abroad

32,481

16,131

 

48,374

22,077

 

 

 

Income/expense from deferred taxes

6,838

10,768

Total

55,212

32,846

Income tax expense by cause
EUR '000

 

2021

2020

Current income tax expense

 

 

Tax expense for current year

51,018

20,549

Reduction due to the use of tax losses

(7,846)

(81)

Adjustment for prior-period income tax

5,203

1,609

 

48,374

22,077

 

 

 

Income/expense from deferred taxes

 

 

Recognition and reversal of temporary differences

712

18,795

Effects of changes in tax rates

849

41

Change in capitalized loss carryforwards

4,524

(6,724)

Effects of previously unrecognized temporary differences from prior periods

846

(1,329)

Changes in valuation adjustment to deferred tax assets (excl. loss carryforwards)

(93)

(15)

 

6,838

10,768

 

 

 

Total

55,212

32,846

The item “Change in capitalized loss carryforwards” relates to the utilization of loss carryforwards in the amount of EUR 3,271 thousand (2020: EUR 61 thousand) and an adjustment to deferred tax assets for loss carryforwards not yet utilized amounting to EUR 1,253 thousand (2020: EUR minus 6,785 thousand).

The reconciliation of calculated income tax expense based on the Austrian corporate tax rate of 25 percent (December 31, 2020: 25 percent) to effective income tax expense is shown in the following table:

Tax reconciliation
EUR '000

 

2021

2020

Earnings before tax (EBT)

182,926

22,251

Calculated income tax expense (25 % of earnings before tax)

45,732

5,563

Deductible distribution of hybrid coupon

(7,188)

0

Tax-free income and tax allowances (particularly research allowance)

(2,055)

(2,348)

Non-deductible expenses, withholding taxes and similar permanent differences

2,313

2,398

Income from investments accounted for using the equity method

468

(1,418)

Effect of different tax rates

(5,374)

(2,304)

Changes in tax rates

849

41

Taxes from prior periods

6,049

280

Exchange rate differences resulting from the translation of deferred tax items from local into functional currency

7,902

10,414

Change in unrecognized deferred tax assets from loss carryforwards, tax credits and other temporary differences

6,637

18,309

Other

(121)

1,910

Effective income tax expense

55,212

32,846

As in the previous year, the ratio of effective income tax expense to earnings before tax is disproportionately high in the 2021 financial year. As in the previous year, the Group reports a relatively high level of reconciliation items arising from write-downs on tax assets (in particular from non-capitalized start-up losses) and from the translation of tax items from local to functional currency (in particular Indonesia, Brazil and Thailand). In addition, in the 2021 financial year a distribution to hybrid capital holders was realized that is tax deductible. For the item “Taxes from prior periods,” see the notes relating to write-downs in note 31.

The item “Changes in tax rates” mainly comprises a statutory tax rate increase in the UK. The corporate income tax rate in the UK will increase from 19 percent to 25 percent effective April 1, 2023. This resulted in an expense of EUR 941 thousand in the 2021 financial year from the measurement of the UK Group companies’ deferred tax assets and deferred tax liabilities.

The item “taxes from prior periods” includes a tax credit of EUR 747 thousand (2020: EUR 24 thousand) from the tax group with B&C Group (also see note 40).

Lenzing AG and the Austrian subsidiaries of the Lenzing Group are subject to an income tax rate of 25 percent (December 31, 2020: 25 percent). The income tax rates for foreign companies range from 11 percent to 34 percent (December 31, 2020: from 11 percent to 34 percent).

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