4.1.1. INCOME TAX EXPENSE DISCLOSED IN THE STATEMENT OF PROFIT OR LOSS
|
Reconciliation of effective tax rate
|
2019
|
2018
|
|
|
Profit before tax
|
2,159
|
4,502
|
|
|
Corporate income tax at the 19% statutory rate applicable in Poland
|
(410)
|
(855)
|
|
|
Differences in tax rates of the Group companies (from 22% to 78% for Norway, 33% for Germany, from 9% to 40% for other)
|
(99)
|
(384)
|
|
|
Deductible temporary differences with respect to which no deferred tax was recognised
|
(279)
|
(54)
|
|
|
Income tax expense disclosed in the statement of profit or loss
|
(788)
|
(1,293)
|
|
|
Including:
|
|
|
|
|
Current tax expense
|
(586)
|
(1,253)
|
|
|
Deferred tax expense
|
(202)
|
(40)
|
|
|
Effective tax rate
|
36%
|
29%
|
In the case of PGNiG Upstream Norway AS (“PUN”), the tax rate is 78%. PUN’s activities in the Norwegian Continental Shelf in 2019 were subject to taxation under two separate tax regimes:
- the corporate income tax regime (tax rate of 22%; in 2018: 23%), and
- the petroleum tax regime (additional tax rate of 56%; in 2018: 55%).
The high tax rate in Norway comes with a wide range of investment incentives and additional deductions.
- For instance, the company may apply a high depreciation/amortisation rate (the annual depreciation/amortisation rate is 16.67%) and commence depreciation/amortisation immediately after capital expenditure is incurred. In the year in which capital expenditure is incurred, the company is entitled to charge depreciation/amortisation for the full year, regardless of the date when it was actually incurred.
- The company may benefit from an investment incentive of 5.2% per annum for four years under the petroleum tax regime. The incentive relates to capital expenditure made in the Norwegian Continental Shelf (excluding exploration expenditure) and amounts to 20.8% of depreciable expenditure (over four years). The incentive is deducted only from income taxable with the petroleum tax (56% rate; in 2018: 55%) and does not apply to income tax. If the incentive amount exceeds income generated in a given year, it becomes deductible in subsequent years.
- Total expenditure on exploration activities may be deducted from revenue. If the company does not generate income from which expenditure on exploration could be deducted, it is entitled to the reimbursement of 78% of the exploration expenditure. The funds are returned in cash by the end of the year following the year covered by the tax return.
- Finance costs may be deducted under both taxation systems.
Under the Norwegian tax system there is no time limit within which tax losses should be used, and interest accrues on losses carried forward. The interest rate applicable to such losses is calculated as a risk-free interest rate, net of income tax. Tax losses incurred by PUN in earlier years (until 2012), increased by interest, reduced its current tax expense. Therefore, in 2013-2017, the company did not pay any income tax in Norway as it recognised a tax loss brought forward. In connection with the full settlement of the tax loss, the company started paying corporate income tax in Norway in August 2018.
|
Current income tax
|
2019
|
2018
|
|
At beginning of the period (tax receivables and payables, net)
|
(370)
|
(179)
|
|
Income tax expense recognised in profit or loss for the period
|
(586)
|
(1,253)
|
|
Tax paid in the period
|
852
|
1,060
|
|
Other changes
|
14
|
2
|
|
At end of the period (tax receivables and payables, net)
|
(90)
|
(370)
|
|
including:
|
|
|
|
- receivables
|
42
|
48
|
|
- payables
|
(132)
|
(418)
|