Components of the income tax (expense)/benefit
|
EURm |
|
2017 |
|
2016 |
|
2015 |
|
Continuing operations |
|
|
|
|
|
|
|
Current tax |
|
(261) |
|
(534) |
|
(258) |
|
Deferred tax |
|
(666) |
|
991 |
|
(88) |
|
Total |
|
(927) |
|
457 |
|
(346) |
Income tax reconciliation
Reconciliation of the difference between income tax computed at the statutory rate in Finland of 20% and income tax recognized in the consolidated income statement:
|
EURm |
|
2017 |
|
2016 |
|
2015 |
|
Income tax benefit/(expense) at statutory rate |
|
102 |
|
274 |
|
(308) |
|
Permanent differences |
|
85 |
|
31 |
|
16 |
|
Tax impact on operating model changes(1) |
|
(245) |
|
439 |
|
– |
|
Non-creditable withholding taxes |
|
(29) |
|
(42) |
|
(17) |
|
Income taxes for prior years(2) |
|
(132) |
|
3 |
|
6 |
|
Effect of different tax rates of subsidiaries operating in other jurisdictions |
|
178 |
|
88 |
|
(50) |
|
Effect of deferred tax assets not recognized(3) |
|
(164) |
|
(318) |
|
(35) |
|
Benefit arising from previously unrecognized deferred tax assets |
|
56 |
|
19 |
|
38 |
|
Net (increase)/decrease in uncertain tax positions |
|
– |
|
(20) |
|
4 |
|
Change in income tax rates(4) |
|
(738) |
|
3 |
|
– |
|
Income taxes on undistributed earnings |
|
(42) |
|
(23) |
|
(7) |
|
Other |
|
2 |
|
3 |
|
7 |
|
Total |
|
(927) |
|
457 |
|
(346) |
|
(1) |
In 2017, the Group continued to integrate former Nokia and Alcatel Lucent operating models, the Group transferred certain intellectual property between its operations in Finland and in the United States, recording a tax expense of EUR 245 million. These transactions reduced the deferred tax assets in the United States and increased the deferred tax assets in Finland. In 2016, following the completion of the Squeeze-Out of the remaining Alcatel Lucent Securities, the Group launched actions to integrate the former Alcatel Lucent and Nokia operating models. In connection with these integration activities, the Group transferred certain intellectual property to its operations in the United States, recording a tax benefit and additional deferred tax assets of EUR 348 million. In addition, the Group elected to treat the acquisition of Alcatel Lucent’s operations in the United States as an asset purchase for United States tax purposes. The impact of this election was to utilize or forfeit existing deferred tax assets and record new deferred tax assets with a longer amortization period than the life of those forfeited assets. As a result of this, EUR 91 million additional deferred tax assets were recorded in 2016. |
|
(2) |
In 2017, the Group recorded a EUR 139 million tax expense related to an uncertain tax position in Germany. The matter relates to the disposal of the former Alcatel Lucent railway signaling business in 2006 to Thalès. |
|
(3) |
In 2016, relates primarily to tax losses and temporary differences in France. |
|
(4) |
In 2017, primarily resulting from the tax rate change in the United States. The United States federal income tax rate reduction caused a revaluation of the United States deferred tax assets and liabilities, resulting in the recognition of an additional tax provision of EUR 777 million. |
Income tax liabilities and assets include a net EUR 344 million liability (EUR 397 million in 2016) relating to uncertain tax positions with inherently uncertain timing of cash outflows.
Prior period income tax returns for certain Group companies are under examination by local tax authorities. The Group has on-going tax audits in various jurisdictions, including India, Finland and Canada. The Group’s business and investments, especially in emerging market countries, may be subject to uncertainties, including unfavorable or unpredictable tax treatment. Management judgment and a degree of estimation are required in determining the tax expense or benefit. Even though management does not expect that any significant additional taxes in excess of those already provided for will arise as a result of these examinations, the outcome or actual cost of settlement may vary materially from estimates.
Deferred tax assets and liabilities
|
|
|
2017 |
|
2016 |
||||||||
|
|
|
Deferred |
|
Deferred |
|
|
|
Deferred |
|
Deferred |
|
|
|
EURm |
|
tax assets |
|
tax liabilities |
|
Net balance |
|
tax assets |
|
tax liabilities |
|
Net balance |
|
Tax losses carried forward and unused tax credits |
|
1 019 |
|
– |
|
|
|
1 428 |
|
– |
|
|
|
Undistributed earnings |
|
– |
|
(106) |
|
|
|
– |
|
(67) |
|
|
|
Intangible assets and property, plant and equipment |
|
2 851 |
|
(353) |
|
|
|
3 713 |
|
(501) |
|
|
|
Defined benefit pension assets |
|
13 |
|
(940) |
|
|
|
3 |
|
(1 334) |
|
|
|
Other non-current assets |
|
85 |
|
(6) |
|
|
|
19 |
|
(52) |
|
|
|
Inventories |
|
157 |
|
(1) |
|
|
|
154 |
|
(3) |
|
|
|
Other current assets |
|
241 |
|
(7) |
|
|
|
81 |
|
(66) |
|
|
|
Defined benefit pension and other post-retirement liabilities |
|
933 |
|
(60) |
|
|
|
1 478 |
|
(29) |
|
|
|
Other non-current liabilities |
|
34 |
|
– |
|
|
|
12 |
|
(2) |
|
|
|
Provisions |
|
240 |
|
(55) |
|
|
|
249 |
|
(6) |
|
|
|
Other current liabilities |
|
223 |
|
(78) |
|
|
|
307 |
|
(56) |
|
|
|
Other temporary differences |
|
12 |
|
(33) |
|
|
|
16 |
|
(46) |
|
|
|
Total before netting |
|
5 808 |
|
(1 639) |
|
4 169 |
|
7 460 |
|
(2 162) |
|
5 298 |
|
Netting of deferred tax assets and liabilities |
|
(1 226) |
|
1 226 |
|
– |
|
(1 759) |
|
1 759 |
|
– |
|
Total after netting |
|
4 582 |
|
(413) |
|
4 169 |
|
5 701 |
|
(403) |
|
5 298 |
Movements in the net deferred tax balance during the year:
|
EURm |
|
2017 |
|
2016 |
|
As of January 1 |
|
5 298 |
|
2 573 |
|
Recognized in income statement, Continuing Operations |
|
(666) |
|
991 |
|
Recognized in income statement, Discontinued Operations |
|
2 |
|
(2) |
|
Recognized in other comprehensive income |
|
(150) |
|
(255) |
|
Recognized in equity |
|
(7) |
|
(5) |
|
Acquisitions through business combinations and disposals |
|
(29) |
|
1 914 |
|
Translation differences |
|
(279) |
|
82 |
|
As of December 31 |
|
4 169 |
|
5 298 |
Amount of temporary differences, tax losses carried forward and tax credits for which no deferred tax asset was recognized due to uncertainty of utilization:
|
EURm |
|
2017 |
|
2016 |
|
Temporary differences |
|
1 879 |
|
2 214 |
|
Tax losses carried forward |
|
18 449 |
|
18 706 |
|
Tax credits |
|
37 |
|
32 |
|
Total |
|
20 365 |
|
20 952 |
The majority of the unrecognized temporary differences and tax losses relate to France. Based on the pattern of losses in the past years and in the absence of convincing other evidence of sufficient taxable profit in the future years, it is uncertain whether these deferred tax assets can be utilized in the foreseeable future. A significant portion of the French unrecognized deferred tax assets are indefinite in nature and available against future French tax liabilities, subject to a limitation of 50% of annual taxable profits.
The deferred tax assets are recognized to the extent it is probable that taxable profit will be available against which the tax losses, tax credits and deductible temporary difference can be utilized in the relevant jurisdictions. The majority of the Group's recognized deferred tax assets relate to unused tax losses, tax credits and deductible temporary differences in Finland of EUR 2.5 billion (EUR 2.2 billion in 2016) and the United States of EUR 1.0 billion (EUR 2.5 billion in 2016). Based on the recent years’ profitability in Finland and the United States, as well as the latest forecasts of future financial performance, the Group has been able to establish a pattern of sufficient tax profitability in Finland and the United States to conclude that it is probable that it will be able to utilize the tax losses, tax credits and deductible temporary differences in the foreseeable future.
Expiry of tax losses carried forward and unused tax credits:
|
|
|
2017 |
|
2016 |
||||||||
|
EURm |
|
Recognized |
|
Unrecognized |
|
Total |
|
Recognized |
|
Unrecognized |
|
Total |
|
Tax losses carried forward |
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 10 years |
|
1 338 |
|
1 491 |
|
2 829 |
|
1 853 |
|
1 681 |
|
3 534 |
|
Thereafter |
|
135 |
|
25 |
|
160 |
|
79 |
|
17 |
|
96 |
|
No expiry |
|
1 674 |
|
16 933 |
|
18 607 |
|
1 878 |
|
17 008 |
|
18 886 |
|
Total |
|
3 147 |
|
18 449 |
|
21 596 |
|
3 810 |
|
18 706 |
|
22 516 |
|
Tax credits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Within 10 years |
|
367 |
|
21 |
|
388 |
|
395 |
|
23 |
|
418 |
|
Thereafter |
|
111 |
|
5 |
|
116 |
|
94 |
|
– |
|
94 |
|
No expiry |
|
35 |
|
11 |
|
46 |
|
66 |
|
9 |
|
75 |
|
Total |
|
513 |
|
37 |
|
550 |
|
555 |
|
32 |
|
587 |
The Group has undistributed earnings of EUR 1 578 million (EUR 1 074 million in 2016) for which a deferred tax liability has not been recognized as these earnings will not be distributed in the foreseeable future.