Note 31. Deferred taxes (deferred tax assets and liabilities) and current taxes

Deferred tax assets and liabilities relate to the following items on the statement of financial position:

Of the total gross deferred tax assets, EUR 22,501 thousand (December 31, 2020: EUR 16,109 thousand) are due within one year. Of the total gross deferred tax liabilities, EUR 12,416 thousand (December 31, 2020: EUR 6,480 thousand) are due within one year. The remaining amounts are due in more than one year.

Deferred taxes developed as follows:

The Group held tax loss carryforwards of EUR 166,812 thousand as at December 31, 2021 (December 31, 2020: EUR 166,162 thousand). The existing tax loss carryforwards can be utilized as follows:

Net deferred tax assets of EUR 3,581 thousand were recognized as at December 31, 2021 (December 31, 2020: EUR 2,409 thousand), including EUR 25 thousand (December 31, 2020: EUR 18 thousand) in group companies that generated losses in the 2021 fiscal year or in the previous year. The tax losses in the group companies concerned derived mainly from one-off events which are not expected to recur in the future. Otherwise, deferred tax assets were recognized if sufficient taxable temporary differences were available.

Certain loss carryforwards were not capitalized because their usability is restricted. If all tax loss carryforwards could be utilized in full, the deferred tax assets on loss carryforwards would total EUR 37,908 thousand (December 31, 2020: EUR 38.889 thousand) instead of EUR 5,236 thousand (December 31, 2020: EUR 9,155 thousand).

The financial assets and other assets shown under deferred tax assets in the above table include amounts for outstanding partial write-downs to investments in accordance with Section 12 Para. 3 no. 2 of the Austrian Corporation Tax Act (“Siebentelabschreibung”, the partial write-downs of investments over a period of seven years for tax purposes) corresponding to a measurement base of EUR 14,994 thousand (December 31, 2020: EUR 17,937 thousand). Partial write-downs of EUR 4,612 thousand were utilized for tax purposes in 2021 (2020: EUR 4,419 thousand).

Deferred tax liabilities were not recognized for temporary differences with a measurement base of EUR 474,481 thousand (December 31, 2020: EUR 446,410 thousand) in connection with investments in subsidiaries, joint ventures and associates and the related proportional share of net assets held by group companies because these differences are not expected to reverse in the foreseeable future.

The receivables from current taxes include prepayments made to foreign taxation authorities. These amounts are recognized when the recoverability is probable, while valuation adjustments are made in all other cases. The gross carrying amount of non-current receivables from current taxes as of December 31, 2021 amounts to EUR 21,819 thousand (December 31, 2020: EUR 15,496 thousand). Payments are sometimes uncertain, especially the timing of payments due to the sometimes long duration of proceedings. For this reason, as at December 31, 2021, write-downs of EUR 6,882 thousand were recognized (December 31, 2020: EUR 339 thousand).

Lenzing AG and the subsidiaries included in the group tax agreement are members of the tax group between B&C Holding Österreich GmbH, as the head of the group, and Lenzing AG and other subsidiaries of Lenzing AG, as group members, in accordance with Section 9 of the Austrian Corporation Tax Act. The tax equalization agreement was revised with effect from the 2021 financial year. This now also includes regulations concerning the interest barrier (Section 12a of the Austrian Corporation Tax Act [KStG]).

Group taxation includes the offset of taxable profits and losses between the group members. The deferred tax assets and deferred tax liabilities of the group members are also offset based on their joint tax assessment. Future tax liabilities from the offset of losses from foreign subsidiaries are recognized in the consolidated financial statements without discounting. The group and tax equalization agreement requires Lenzing AG to pay a tax allocation equal to the corporate income tax attributable to the taxable profit of the company and the subsidiaries included in the tax group. The tax allocation payable by Lenzing AG is reduced by any domestic and foreign withholding taxes deductible from the overall group result by the group parent and by any transferred minimum corporate income taxes.

The tax allocation to be paid by Lenzing AG is also reduced by any current losses/loss carryforwards caused by the group parent that can be offset against positive earnings of Lenzing AG’s tax group in the assessment year. The tax allocation is reduced by 25 percent (2020: 25 percent) of the corporate tax rate (i.e. currently 6.25 percent; 2020: 6.25 percent) applicable to the current losses/loss carryforwards recorded by the head of the tax group that are offset against positive earnings in an assessment year for the head of the tax group. Tax losses recorded by Lenzing AG and the participating subsidiaries are kept on record and offset against future tax gains. An equalization payment is made as compensation for any losses that are not offset when the contract is terminated.

The Lenzing Group includes the effects of uncertain tax positions in the calculation of current and deferred taxes. Tax claims are recognized at the expected reimbursement amount in cases where the claim is sufficiently certain. The tax returns of the Lenzing Group’s subsidiaries are reviewed regularly by the taxation authorities. Appropriate provisions have been recognized for possible future tax obligations based on a number of factors which include interpretations, commentaries and legal decisions relating to the respective tax jurisdiction and past experience. In addition, uncertain tax positions are evaluated on the basis of estimates and assumptions for future events. New information can become available in the future that leads the Group to change its assumptions regarding the appropriateness of tax positions. Any such changes will affect tax expense in the period in which they are identified.

The recoverability of deferred tax assets is generally based on the positive taxable results expected in the future – after the deduction of taxable temporary differences – in line with the forecasts approved by the Managing Board. These forecasts are also used for impairment testing (see note 11). The assessment of unused tax loss carryforwards and tax credits also involves the consideration of utilization requirements.