18 Income tax
| Note | 2017 | 2016 | 2015 | |||||||||||||
|
Current tax |
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|
Current year |
220 | 33 | 111 | |||||||||||||
|
Adjustments to prior years |
47 | (46 | ) | (70 | ) | |||||||||||
| 267 | (13 | ) | 42 | |||||||||||||
|
Deferred tax |
43 | |||||||||||||||
|
Origination / (reversal) of temporary differences |
397 | 102 | (169 | ) | ||||||||||||
|
Changes in tax rates / bases |
(550 | ) | 93 | (22 | ) | |||||||||||
|
Changes in deferred tax assets as a result of recognition / write off of previously not recognized / recognized tax losses, tax credits and deductible temporary differences |
(45 | ) | (54 | ) | (8 | ) | ||||||||||
|
Non-recognition of deferred tax assets |
41 | 33 | 22 | |||||||||||||
|
Adjustments to prior years |
(45 | ) | 12 | 53 | ||||||||||||
| (201 | ) | 185 | (125 | ) | ||||||||||||
|
Income tax for the period (income) / charge |
65 | 172 | (83 | ) | ||||||||||||
|
Adjustments to prior years include shifts between current and deferred tax. |
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| Reconciliation between standard and effective income tax: | 2017 | 2016 | 2015 | |||||||||||||
|
Income before tax |
2,534 | 610 | (514 | ) | ||||||||||||
|
Income tax calculated using weighted average applicable statutory rates |
745 | 239 | (57 | ) | ||||||||||||
|
Difference due to the effects of: |
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|
Non-taxable income |
(157 | ) | (126 | ) | 43 | |||||||||||
|
Non-tax deductible expenses |
28 | 21 | 49 | |||||||||||||
|
Changes in tax rate/base |
(550 | ) | 93 | (22 | ) | |||||||||||
|
Different tax rates on overseas earnings |
(1 | ) | 8 | 6 | ||||||||||||
|
Tax credits |
(67 | ) | (41 | ) | (100 | ) | ||||||||||
|
Other taxes |
67 | 38 | 14 | |||||||||||||
|
Adjustments to prior years |
2 | (34 | ) | (17 | ) | |||||||||||
|
Origination and change in contingencies |
9 | 8 | 3 | |||||||||||||
|
Changes in deferred tax assets as a result of recognition / write off of previously not recognized / recognized tax losses, tax credits and deductible temporary differences |
(45 | ) | (54 | ) | (8 | ) | ||||||||||
|
Non-recognition of deferred tax assets |
41 | 33 | 22 | |||||||||||||
|
Tax effect of (profit) / losses from joint ventures and associates |
(7 | ) | (7 | ) | (8 | ) | ||||||||||
|
Other |
(1 | ) | (6 | ) | (8 | ) | ||||||||||
| (680 | ) | (67 | ) | (27 | ) | |||||||||||
|
Income tax for the period (income) / charge |
65 | 172 | (83 | ) | ||||||||||||
The weighted average applicable statutory tax rate for 2017 is 29.4% (2016: 39.2%; 2015: 11.0%). The decrease in the weighted average applicable statutory tax rate compared to 2016 is caused by relatively more income before tax in the Netherlands and the UK versus income before tax in the US. The weighted average applicable statutory tax rate in 2015 was impacted by a disproportional loss in the UK.
Non-taxable income in 2017 includes the tax exempt sale proceeds of the Dutch Unirobe Meeùs Group. Non-taxable income in 2015 was negatively impacted by the non-deductible loss on the sale of Aegon’s Canadian life insurance business.
Changes in tax rate/base in 2017 highly benefited by the decrease of the US corporate income tax rate from 35% to 21% as from January 1, 2018.
Changes in tax rate/base in 2016 was heavily impacted by the release of profits from other comprehensive income (OCI) to income statement in the UK. These profits were taxed in the past against high historic tax rates and were released from OCI to the income statement against a lower statutory tax rate in 2016. The difference caused a negative impact in changes in tax rate/base.
In the UK, the corporate income tax rate decreased to 19% as per April 1, 2017. The beneficial impact of this change was reflected in the 2015 change in tax rate/base. The tax rate will continue to decrease from 19% to 17% with effect from April 1, 2020. The minor impact of this tax rate change was included in the 2016 change in tax rate/base. In Hungary, the corporate income tax rate decreased from 19% to 9% as from January 1, 2017. The minor impact of this tax rate change was included in the 2016 change in tax rate/base.
Tax credits in 2017 increased by US foreign tax credits. Tax credits in 2015 includes tax benefits related to solar investments in the US.
Adjustments to prior years in 2016 included a one-time tax benefit in the US caused by the revised tax deduction for dividends received on prior filed tax returns.
The following tables present income tax related to components of other comprehensive income and retained earnings.
| 2017 | 2016 | 2015 | ||||||||||||||
|
Items that will not be reclassified to profit and loss: |
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|
Changes in revaluation reserve real estate held for own use |
9 | (3 | ) | (2 | ) | |||||||||||
|
Remeasurements of defined benefit plans |
(175 | ) | 89 | (75 | ) | |||||||||||
| (166 | ) | 86 | (77 | ) | ||||||||||||
|
Items that may be reclassified subsequently to profit and loss: |
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|
Gains / losses on revaluation of available-for-sale investments |
(134 | ) | (187 | ) | 810 | |||||||||||
|
Gains / losses transferred to the income statement on disposal and impairment of available-for-sale investments |
441 | 427 | 124 | |||||||||||||
|
Changes in cash flow hedging reserve |
567 | 24 | (98 | ) | ||||||||||||
|
Movement in foreign currency translation and net foreign investment hedging reserve |
76 | (39 | ) | (52 | ) | |||||||||||
| 951 | 225 | 783 | ||||||||||||||
|
Total income tax related to components of other comprehensive income |
785 | 311 | 706 | |||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||||
| Income tax related to equity instruments and other | ||||||||||||||||
|
Income tax related to equity instruments |
33 | 44 | 44 | 46 | ||||||||||||
|
Other |
14 | (3 | ) | - | ||||||||||||
|
Total income tax recognised directly in retained earnings |
58 | 41 | 46 | |||||||||||||
The income tax related to components of OCI includes a deferred tax benefit of EUR 479 million caused by the decrease of the US corporate income tax rate from 35% to 21% as from January 1, 2018.