Note 29: Deferred taxes
The following table shows the reconciliation between the effective and theoretical tax income at the nominal Belgian income tax rate of 33.99% (excluding additional contributions):
| (€‘000) |
For the year ended December 31, |
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| 2017 | 2016 | 2015 | ||||||||||
|
Loss before tax |
(56,396 | ) | (23,612 | ) | (29,114 | ) | ||||||
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Nominal tax rate |
33.99 | % | 33.99 | % | 33.99 | % | ||||||
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Tax income at nominal tax rate |
18,220 | 8,026 | 9,896 | |||||||||
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Disallowed expenses |
(221 | ) | — | — | ||||||||
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Cost of capital increases |
— | — | 3,663 | |||||||||
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Share-based payment expense |
(873 | ) | (968 | ) | (498 | ) | ||||||
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Deferred Tax assets not recognised |
(17,126 | ) | (7,058 | ) | (13,061 | ) | ||||||
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Effective income tax (expense) / income |
1 | 6 | — | |||||||||
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Effective tax rate |
0 | % | 0 | % | 0 | % | ||||||
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As having not yet reached the commercialization step, the Group accumulates tax losses that are carried forward indefinitely for offset against future taxable profits of the Group. Significant uncertainty exists however surrounding the Group’s ability to realise taxable profits in a foreseeable future. Therefore, the Group has not recognised any deferred tax income in its income statement.
Unrecognized deferred tax assets and liabilities are detailed below by nature of temporary differences for the current year:
| (€‘000) | For the year ended | |||||||||||
| 2017 | ||||||||||||
| Assets | Liabilities | Net | ||||||||||
|
Intangibles assets |
(14 | ) | (3,960 | ) | (3,974 | ) | ||||||
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Tangible assets |
— | (215 | ) | (215 | ) | |||||||
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Recoverable cash advances liability |
349 | — | 349 | |||||||||
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Contingent consideration liability |
4,471 | — | 4,471 | |||||||||
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Employee Benefits liability |
51 | — | 51 | |||||||||
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Other temporary difference |
5 | — | 5 | |||||||||
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Tax-losses carried forward |
48,152 | — | 48,152 | |||||||||
| — | — | — | ||||||||||
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Unrecognised Gross Deferred Tax assets/(liabilities) |
53,014 | (4,174 | ) | 48,839 | ||||||||
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Netting by tax entity |
(3,960 | ) | 3,960 | — | ||||||||
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Unrecognised Net Deferred Tax assets/(liabilities) |
49,054 | (215 | ) | 48,839 | ||||||||
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Unrecognized deferred tax assets and liabilities are detailed below by nature of temporary differences for the previous years:
| (€‘000) | For the year ended | |||||||||||
| 2016 | ||||||||||||
| Assets | Liabilities | Net | ||||||||||
|
Intangibles assets |
14,704 | — | 14,704 | |||||||||
|
Tangible assets |
— | (379 | ) | (379 | ) | |||||||
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Recoverable cash advances liability |
2,322 | — | 2,322 | |||||||||
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Contingent consideration and other financial liabilities |
— | — | — | |||||||||
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Employee Benefits liability |
69 | — | 69 | |||||||||
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Other temporary difference |
— | — | — | |||||||||
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Tax-losses carried forward |
22,654 | — | 22,654 | |||||||||
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Unrecognised Gross Deferred Tax assets/(liabilities) |
39,749 | (379 | ) | 39,370 | ||||||||
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Netting by tax entity |
464 | (464 | ) | — | ||||||||
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Unrecognised Net Deferred Tax assets/(liabilities) |
40,214 | (844 | ) | 39,370 | ||||||||
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| (€‘000) | For the year ended | |||||||||||
| 2015 | ||||||||||||
| Assets | Liabilities | Net | ||||||||||
|
Intangibles assets |
11,676 | — | 11,676 | |||||||||
|
Tangible assets |
— | — | — | |||||||||
|
Recoverable cash advances liability |
3,433 | — | 3,433 | |||||||||
|
Contingent consideration liability |
41 | — | 41 | |||||||||
|
Employee Benefits liability |
— | — | — | |||||||||
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Other temporary difference |
(21 | ) | — | (21 | ) | |||||||
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Tax-losses carried forward |
21,707 | — | 21,707 | |||||||||
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Unrecognised Gross Deferred Tax assets/(liabilities) |
36,836 | — | 36,836 | |||||||||
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Netting by tax entity |
2,450 | — | 2,450 | |||||||||
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Unrecognised Net Deferred Tax assets/(liabilities) |
39,286 | — | 39,286 | |||||||||
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The Group’s main deductible temporary difference relates to tax losses carried forward, which have indefinite term under both BE and US tax regimes applicable to our local subsidiaries. In addition, the Group can benefit from additional tax benefits (like notional interest deduction in Belgium) which can be carry-forwarded until the fiscal year 2019.
The remaining temporary differences refer to differences between IFRS accounting policies and local tax valuation rules.
The Group has not recognised any deferred tax asset on its balance sheet, for the same reason as explained above (uncertainty relating to taxable profits in a foreseeable future).
The change in the Group’s unrecognised deferred tax asset balance is detailed below:
UNRECOGNISED DEFERRED TAX ASSET BALANCE ROLL FORWARD
| (€‘000) | For the year ended | |||||||||||
|
EUR |
2017 | 2016 | 2015 | |||||||||
|
Opening balance at January 1st, |
39,370 | 39,286 | 26,169 | |||||||||
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Temporary difference creation or reversal |
(15,580 | ) | (6,844 | ) | 6,537 | |||||||
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Change in Tax-losses carried forward |
44,011 | 6,775 | 6,580 | |||||||||
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Foreign exchange rate effect |
(113 | ) | 154 | — | ||||||||
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Change in BE tax rate applicable (34% > 25%) |
(14,896 | ) | — | — | ||||||||
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Change in US tax rate applicable (35% > 23%) |
(3,953 | ) | — | — | ||||||||
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Closing balance at December 31, |
48,839 | 39,370 | 39,286 | |||||||||
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The increases relate to the additional losses reported year on year.