7. Income and deferred taxes
7.1 Income taxes
Accounting policies
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before taxation’ as reported in the consolidated statement of profit or loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted at the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
Income tax recognised in profit or loss
In € thousands | 2021/2022 | 2020/2021 | |
Current tax | |||
In respect of the current year | 6,421 | 14,063 | |
In respect of prior year | 51 | 22 | |
6,472 | 14,085 | ||
Deferred tax | |||
In respect of the current year | 1,547 | 157 | |
Net income tax related to adjustment cash flow hedge reserve | (578) | (19) | |
969 | 138 | ||
Total income tax expense recognised in the current year | 7,441 | 14,223 |
The income tax expense for the year can be reconciled to the accounting profit as follows:
In € thousands | 2021/2022 | 2020/2021 | |
Result before taxation | 9,154 | 40,760 | |
Income tax expense calculated at 25,33% (2020/2021: 25%) | 2,319 | 10,190 | |
Effect of income that is exempt from taxation | (22) | (10) | |
Tax losses not recognised | 9 | 82 | |
Effect of expenses that are not deductible in determining taxable profit 1 | 5,388 | 5,188 | |
Application local, nominal rates (higher/lower rates) | (31) | (20) | |
Effect of rate adjustment deferred taxes | (273) | (1,229) | |
Income tax prior year | 51 | 22 | |
Income tax expense recognised in profit or loss | 7,441 | 14,223 |
- 1 The management fee will be taxed at the member level and compensation is taxed at Group level. The Group has an agreement with the tax authorities regarding a minimum taxable amount of 7% of the membership capital of the members of Coöperatief Deloitte U.A.
Coöperatief Deloitte U.A. and its wholly-owned subsidiaries in the Netherlands form one tax group for company tax purposes. There are no losses available for set off against tax liabilities.
Current tax assets and liabilities
In € thousands | May 31, 2022 | May 31, 2021 | |
Current tax liabilities | (451) | (7,677) | |
(451) | (7,677) |
7.2 Deferred taxes
Deferred tax assets and liabilities
In € thousands | May 31, 2022 | May 31, 2021 | |
Deferred tax assets | 9,490 | 10,921 | |
Deferred tax liabilities | (1,402) | (1,263) | |
8,088 | 9,658 |
Of the deferred tax assets €2.2 million is expected to expire next year, €7.2 million is expected to expire on regular yearly basis up and until 2025/2026. The deferred tax liabilities are expected to be carried forward indefinitely.
Movement deferred tax in the year ended May 31, 2022
In € thousands | Opening balance | Recognised in the profit or loss | Exchange differences | Closing balance | |||
Deferred tax assets/(liabilities) in relation to: | |||||||
Goodwill and intangibles 1 | 7,646 | (1,677) | 5,969 | ||||
Property, plant and equipment | 1,431 | 624 | 2,055 | ||||
Provisions | (29) | (9) | (3) | (41) | |||
Interest rate swap | 518 | (518) | 0 | ||||
Tax losses | 92 | 0 | 13 | 105 | |||
9,658 | (1,580) | 10 | 8,088 |
Movement deferred tax in the year ended May 31, 2021
In € thousands | Opening balance | Recognised in the profit or loss | Exchange differences | Closing balance | |||
Deferred tax assets/(liabilities) in relation to: | |||||||
Goodwill and intangibles 1 | 8,355 | (709) | 0 | 7,646 | |||
Property, plant and equipment | 814 | 617 | 0 | 1,431 | |||
Provisions | (32) | 0 | 3 | (29) | |||
Interest rate swap | 583 | (65) | 0 | 518 | |||
Tax losses | 101 | 0 | (9) | 92 | |||
9,821 | (157) | (6) | 9,658 |
- 1 Goodwill and intangibles relates to goodwill which is amortised and is deductible for tax purposes but not under IFRS.
Deferred tax assets not recognised in the Consolidated statement of financial position
An amount €609 (2021: €621) of carryforward losses has not been recognised as a deferred tax assets because it is not probable that sufficient taxable profit will be available to utilise the deferred tax asset in time.