| C8 | Taxes |
The Company’s tax benefit for 2017 was SEK 4,267 (–2,131) million or 10.8% (52.9%) of income after financial items. The tax rate may vary between years depending on business and geographical mix. Items reported for income taxes include a reasonable estimate of the impact of the material aspects of the United Sates Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, on the current and deferred tax assets and liabilities.
Income taxes recognized in the income statement
| 2017 | 2016 | 2015 | ||||||||||
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Current income taxes for the year |
–4,168 | –3,654 | –6,641 | |||||||||
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Current income taxes related to prior years |
83 | –489 | –104 | |||||||||
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Deferred tax income/expense (+/–) |
8,355 | 2,017 | 546 | |||||||||
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Share of taxes in joint ventures and associated companies |
–3 | –5 | — | |||||||||
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Tax expense/benefit |
4,267 | –2,131 | –6,199 | |||||||||
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A reconciliation between reported tax expense for the year and the theoretical tax expense that would arise when applying statutory tax rate in Sweden, 22.0%, on the consolidated income before taxes, is shown in the table below. Tax effects of non-deductible expenses includes the effect of an impairment of goodwill. The tax effect of rate change mainly includes the effect of the reduction in the U.S. corporate income tax rate.
Reconciliation of Swedish income tax rate with effective tax rate
| 2017 | 2016 | 2015 | ||||||||||
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Expected tax expense at Swedish tax rate 22.0% |
8,652 | –886 | –4,372 | |||||||||
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Effect of foreign tax rates |
205 | –536 | –1,101 | |||||||||
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Current income taxes related to prior years |
83 | –489 | –104 | |||||||||
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Remeasurement of tax loss carry-forwards |
–150 | 143 | –250 | |||||||||
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Remeasurement of deductible temporary differences |
127 | 119 | 185 | |||||||||
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Tax effect of non-deductible expenses |
–4,144 | –1,357 | –1,559 | |||||||||
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Tax effect of non-taxable income |
480 | 935 | 981 | |||||||||
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Tax effect of changes in tax rates |
–986 | –60 | 21 | |||||||||
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Tax expense/benefit |
4,267 | –2,131 | –6,199 | |||||||||
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Effective tax rate |
10.8 | % | 52.9 | % | 31.2 | % | ||||||
Deferred tax balances
Deferred tax assets and liabilities are derived from the balance sheet items as shown in the table below.
Tax effects of temporary differences and tax loss carry-forwards
| Deferred tax assets |
Deferred tax liabilities |
Net balance | ||||||||||
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2017 |
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Intangible assets and property, plant and equipment |
894 | 2,374 | ||||||||||
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Current assets |
2,667 | 866 | ||||||||||
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Post-employment benefits |
4,886 | 704 | ||||||||||
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Provisions |
1,846 | 15 | ||||||||||
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Other |
3,556 | 275 | ||||||||||
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Loss carry-forwards |
10,712 | |||||||||||
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Deferred tax assets/liabilities |
24,561 | 4,234 | 20,327 | |||||||||
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Netting of assets/liabilities |
–3,333 | –3,333 | ||||||||||
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Deferred tax balances, net |
21,228 | 901 | 20,327 | |||||||||
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2016 |
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Intangible assets and property, plant and equipment |
1,223 | 4,173 | ||||||||||
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Current assets |
2,352 | 501 | ||||||||||
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Post-employment benefits |
4,382 | 692 | ||||||||||
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Provisions |
1,631 | 13 | ||||||||||
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Other |
4,557 | 274 | ||||||||||
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Loss carry-forwards |
4,883 | — | ||||||||||
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Deferred tax assets/liabilities |
19,028 | 5,653 | 13,375 | |||||||||
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Netting of assets/liabilities |
–3,506 | –3,506 | ||||||||||
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Deferred tax balances, net |
15,522 | 2,147 | 13,375 | |||||||||
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Changes in deferred taxes, net
| 2017 | 2016 | |||||||
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Opening balance, net |
13,375 | 10,711 | ||||||
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Recognized in net income (loss) |
8,355 | 2,017 | ||||||
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Recognized in other comprehensive income (loss) |
–563 | 521 | ||||||
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Acquisitions/disposals of subsidiaries |
— | –57 | ||||||
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Reclassification to current tax |
–462 | — | ||||||
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Currency translation differences |
–378 | 183 | ||||||
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Closing balance, net |
20,327 | 13,375 | ||||||
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Tax effects reported directly in Other comprehensive income (loss) amount to SEK –563 (521) million, of which actuarial gains and losses related to pensions constituted SEK –547 (520) million.
Deferred tax assets are only recognized in countries where the Company expects to be able to generate corresponding taxable income in the future to benefit from tax reductions.
Deferred tax assets and liabilites have been adjusted for the effect of the reduction of the U.S. corporate income tax rate.
Tax loss carry-forwards
Significant tax loss carry-forwards are related to Sweden, the United States and Germany. These countries have long or indefinite periods of utilization. Of the total SEK 10,712 (4,883) million recognized deferred tax assets related to tax loss carry-forwards, SEK 8,795 (3,774) million relates to Sweden.
Deferred tax assets regarding tax loss carry-forwards are reported to the extent that realization of the related tax benefit through future taxable profits is probable also when considering the period during which these can be utilized, as described below.
As of December 31, 2017, the recognized tax loss carry-forwards amounted to SEK 47,360 (20,929) million. The increase is primarily attributable to taxable losses realized in 2017, by Swedish legal entities. Under Swedish law, tax losses can be carried forward indefinitely. The tax value of these loss carry-forwards is reported as a tax asset based on the indefinite utilization period and the expectation that significant taxable income will be realized in future years by these Swedish legal entities to offset these loss carry-forwards.
The final years in which the recognized tax loss carry-forwards can be utilized are shown in the following table.
Tax loss carry-forwards
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Year of expiration |
Tax loss carry-forwards |
Tax value |
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2018 |
— | — | ||||||
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2019 |
37 | 9 | ||||||
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2020 |
74 | 15 | ||||||
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2021 |
197 | 32 | ||||||
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2022 |
870 | 218 | ||||||
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2023 or later |
46,182 | 10,438 | ||||||
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Total |
47,360 | 10,712 | ||||||
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In addition to the table above there are tax loss carry-forwards of SEK 4,544 (3,936) million at a tax value of SEK 842 (950) million that have not been recognized due to judgments of the possibility they will be used against future taxable profits in the respective jurisdictions. The majority of these tax loss carry-forwards have an expiration date in excess of five years.