12. Income tax (expense)/benefit
The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where TMF Group operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except if it relates to items recognised directly in equity. In this case it is recognised in equity, or if it relates to items recognised directly in OCI, in which case it is recognised in OCI.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustments to tax payable in respect of previous years.
|
In millions of Euro |
2023 |
2022 |
|---|---|---|
|
Total income tax expense |
(18.1) |
- |
|
Current tax on result for the year |
(28.9) |
- |
|
Adjustments for current tax of prior periods |
0.8 |
- |
|
Total current tax expense |
(28.1) |
- |
|
Deferred income tax (note 13) |
10.0 |
- |
The tax on TMF Group's result before tax differs from the theoretical amount that would arise using the tax rates applicable in the Netherlands (25.8%) on the results of the consolidated entities as shown below:
|
In millions of Euro |
2023 |
2022 |
|---|---|---|
|
Weighted average effective tax rate |
48.0% |
n.a. |
|
Result for the year |
(55.8) |
(0.7) |
|
Income tax expense |
(18.1) |
- |
|
Result before income tax |
(37.7) |
(0.7) |
|
Tax calculated at the Company’s domestic tax rate |
9.7 |
- |
|
Effect of tax rates in foreign jurisdictions |
4.6 |
- |
|
Change in tax rates |
(0.3) |
- |
|
Income not subject to tax |
3.9 |
- |
|
Expenses not deductible * |
(35.7) |
- |
|
(De)recognition of previously (un)recognised tax losses |
0.7 |
- |
|
Re-assessment of corporate tax previous years |
(0.8) |
- |
|
Utilisation of previously unrecognised carry forward losses |
0.2 |
- |
|
Withholding tax related to taxable profit |
(4.2) |
- |
|
Tax losses for which no deferred income tax asset was recognised |
3.8 |
- |
|
Tax charge |
(18.1) |
- |
* The non-deductible expenses mainly relate to financing costs
TMF Group is a Dutch company with subsidiaries spread over the world and subject to income tax in the Netherlands and in the countries where TMF Group conducts operations. As part of the normal course of business TMF Group has uncertain tax positions and exposures resulting from interpretation of applicable tax laws applied in our tax returns. If any uncertain tax positions have been assessed they are provided for under current income tax liabilities as required under the newly adopted accounting guidance in IFRIC. The adoption did not impact the financial position. TMF Group's transfer pricing model is consistent with the arm’s length principle and in accordance to the OECD transfer pricing guidelines.
TMF Group has its Ultimate Parent Entity in the Netherlands, which has enacted the Global Minimum Tax Rules for fiscal years starting on or after 1 January 2024. TMF Group operates in 87 jurisdictions, including a number of jurisdictions that during the year ended 31 December 2023 did not have a corporate income tax system, or had a corporate income tax system with a statutory tax rate lower than 15% during the year ended 31 December 2023. Since the newly enacted legislation in the Netherlands is only applicable as of 1 January 2024, there is no current tax impact for the year ended 31 December 2023.
Furthermore, TMF Group has applied the mandatory temporary relief from deferred tax accounting for the impacts of the Global Minimum Tax, and accounts for it as a current tax when it is incurred.
TMF Group carried out an analysis on the impact of the Global Minimum Tax Rules, and if they had applied during the year ended 31 December 2023, then the profits relating to the Group’s operations in the following jurisdictions would have been subject to Global Minimum Tax: Argentina (ETR 1%; top-up tax 545 thousand), Ireland (ETR 11%; top-up tax 108 thousand) and United Arab Emirates (ETR 0%; top-up tax 417 thousand)