Annual Report 2014 | Suomeksi |

14 Income tax expense

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14.1 Profit before tax
EUR million 2014 2013
Finnish companies 2,421 440
Swedish companies 287 375
Other companies 652 583
Total 3,360 1,398
14.2 Major components of income tax expense by major countries
EUR million 2014 2013
Current taxes
Finnish companies ‑87 ‑104
Swedish companies ‑57 ‑54
Other companies ‑48 ‑46
Total ‑192 ‑203
Deferred taxes
Finnish companies 15 81
Swedish companies 23 ‑8
Other companies ‑34 ‑56
Total 5 17
Adjustments recognised for current tax of prior periods
Finnish companies ‑6 ‑1
Swedish companies 0 0
Other companies ‑5 1
Total ‑11 0
Total income taxes ‑199 ‑186
14.3 Income tax rate
The table below explains the difference between the theoretical enacted tax rate in Finland compared to the effective income tax rate in the income statement.
EUR million 2014 % 2013 %
Profit before tax 3,360 1,398
Tax calculated at nominal Finnish tax rate ‑672 20.0 ‑343 24.5
Tax rate changes 0 0.0 79 ‑5.7
Differences in tax rates and regulations 5 ‑0.2 53 ‑3.8
Income not subject to tax 0 0.0 2 ‑0.2
Tax exempt capital gains 438 ‑13.0 12 ‑0.9
Expenses not deductible for tax purposes ‑2 0.0 ‑7 0.5
Share of profit of associated companies and joint ventures 34 ‑1.0 40 ‑2.9
Taxes related to dividend distributions ‑3 0.1 0 0.0
Changes in tax valuation allowance related to not recognised tax losses 0 0.0 ‑19 1.4
Other items 7 ‑0.2 ‑3 0.2
Adjustments recognised for taxes of prior periods ‑6 0.2 ‑1 0.1
Tax charge in the income statement ‑199 5.9 ‑186 13.3
Key tax indicators:
‑ The weighted average applicable income tax rate for 2014 is 20.5% (2013: 22.5%)
‑ The effective income tax rate in the income statement for 2014 is 5.9% (2013: 13.3%)
‑ The effective income tax rate excluding the share of profits from associates and joint ventures, tax exempt capital gains and tax rate changes for 2014 is 18.8% (2013: 22.7%)
‑ The total tax rate for 2014 is 14.3% (2013 31.8%)
‑ The total tax rate excluding the share of profits from associates and joint ventures and tax exempt capital gains for 2014 is 38.2% (2013: 36.6%)
Effective income tax rate and effective total tax rate are effected by gains or losses on sale of shares. Many countries like Finland, Sweden and Netherlands have exempted income on capital gains and losses from income tax purposes. With this countries aim to tax the operative income of the company and avoid taxing the same income twice in case of the sale of the shares. Taxation of capital gains or losses is in line with the taxation of dividend income.
One time tax exempt capital gains from divestments during 2014 reduced the effective income tax rate with 13%.
In December 2013 the Finnish Parliament passed legislation lowering the income tax rate from 24.5% to 20%. The one‑time positive effect in 2013 in the income tax cost from the tax rate change was approximately EUR 79 million.
Fortum has a material deferred tax liability owing to its investments in non current assets. These assets are depreciated more rapidly for tax than for accounting purposes resulting in lower current tax payments at the start of an assets’ lifetime and higher tax payments at the end of its lifetime. This difference results in a deferred tax liability, which is valued using the tax rate expected to be in force when the liability unwinds.
14.4 Total taxes
Fortum has current income taxes in 2014 totalling EUR 203 million (2013: 203). The effective income tax rate indicates tax burden taking into account the differences between accounting and tax rules, including tax exempt capital gains, tax rate changes and other differences. The effective tax rate may therefore fluctuate even though current income taxes are stable.
Taxes borne indicate different taxes that Fortum pays for the period. In 2014 Fortum’s taxes borne were EUR 525 million (2013: 558). Taxes borne include corporate income taxes, production taxes, employment taxes, taxes on property and cost of indirect taxes. Production taxes include also production taxes and taxes on property paid through electricity purchased from associated companies. The total tax rate indicates the burden on taxes borne by Fortum from its profit before these taxes.
Other tax contribution indicators
Total taxes borne in relation to segment assets by location was in 2014 in Finland 4.6% (2013: 4.0%), in Sweden 4.0% (2013: 4.0%) and Other countries 2.8% (2013: 1.9%). The indicator reflects how much the Total taxes borne are in relation to the segment assets in a country. Total taxes borne in relation to sales volumes was in 2014 in Finland EUR 6.3 million per TWh (2013: 6.0), in Sweden EUR 9.9 million per TWh (2013: 12.7) and Other countries EUR 1.4 million per TWh (2013: 1.4).
For group internal long term financing Fortum has financing companies in the Netherlands, Belgium, Luxembourg and Ireland. Fortum group financing companies' total taxes borne were in 2014 EUR 40 million (2013: 36) and total tax rate was 13.2% (2013: 12.4%). Total taxes borne in relation to net interest bearing receivables and liabilities was in 2014 0.4% (2013: 0.3%), which reflects the current low interest levels.
In addition, Fortum administers and collects different taxes on behalf of governments and authorities. Such taxes include VAT, and excise taxes on power consumed by customers, payroll taxes and withholding taxes. The amount of taxes collected by Fortum was EUR 527 million (2013: 700).
Fortum has had several tax audits ongoing during 2014. Fortum has received income tax assessments in Sweden for the years 2009‑2012, in Belgium for the years 2008 ‑2011 as well as in Finland regarding the year 2007. Fortum has appealed all assessments received. Based on legal analysis, no provision has been accounted for in the financial statements related to tax audits.
See also Note 29 Deferred income taxes,
Note 11 Materials and services and
Operating and financial review; Sustainability.
For further information regarding the on‑going tax appeals see Note 39 Legal actions and official proceedings.
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