Groupe Renault - 2020 Universal Registration Document

369 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2020 04 CONSOLIDATED FINANCIAL STATEMENTS GROUPE RENAULT GROUPE RENAULT: A COMPANY THAT ACTS RESPONSIBLY CORPORATE GOVERNANCE FINANCIAL STATEMENTS RENAULT AND ITS SHAREHOLDERS ANNUAL GENERAL MEETING OF RENAULT ON APRIL 23, 2021 ADDITIONAL INFORMATION CURRENT AND DEFERRED TAXES NOTE 8 As Renault SA elected to determine French income taxes under the domestic tax consolidation regime when it was formed, this is the regime applicable to the Group in which Renault SA is taxed in France. The Groupe Renault also applies other optional tax consolidation systems in Germany, Italy, Spain, Romania and the UK. Current and deferred taxes 8 - A - (€ million) 2020 2019 Current income taxes (306) (626) Deferred tax income (charge) (114) (828) CURRENT AND DEFERRED TAXES (420) (1,454) The current income tax charge for entities included in the French tax consolidation group amount to -€43 million in 2020 (-€117 million in 2019). The decrease in the current income tax charge between 2019 and 2020 is due to the decrease in the business tax cotisation sur la valeur ajoutée des entreprises (CVAE) given that the taxable income is negative. In 2020, -€263 million of the current income tax charge comes from foreign entities including AVTOVAZ (-€509 million in 2019). This charge decreased in 2020, largely due to the lower taxable income in certain subsidiaries. An analysis of the recoverability of deferred taxes linked to the AVTOVAZ tax-loss carry forwards was conducted in the context of the COVID-19 pandemic. Because of the significant deterioration in the outlook for the Russian market, these assets are no longer recognized. This has generated an additional deferred tax expense of -€248 million (-RUB 20,-510 million) in 2020. The deferred tax charge for 2019 reflected the fact that recognition of deferred tax assets on tax loss carryforwards under the French tax consolidation system had been discontinued (with an effect of -€753 million), mainly as there were no prospects of taxable income for the tax consolidation group on the horizon of the Drive the Future plan. Breakdown of the tax charge 8 - B - (€ million) 2020 2019 Income before taxes and share in net income of associates and joint ventures (2,481) 1,663 Statutory income tax rate in France 32.02% 34.43% Theoretical tax income (charge) 795 (573) Effect of differences between local tax rates and the French rate (1) 72 194 Tax credits 12 78 Distribution taxes 39 (56) Change in unrecognized deferred tax assets (2) (721) (1,012) Other impacts (3) (571) 8 Current and deferred tax income (charge) excluding taxes based on interim taxable profits (374) (1,361) Taxes based on interim taxable profits (4) (46) (93) Current and deferred tax income (charge) (420) (1,454) The main contributors to the tax rate differential are Romania, United Kingdom, Russia, Switzerland and Turkey. (1) The deferred tax charge for 2020 includes the effect of discontinued recognition of deferred tax assets on AVTOVAZ tax loss carryforwards, and 2019 includes the effect of (2) discontinued recognition of deferred tax assets on tax loss carryforwards related to entities included in the French tax consolidation group (see note 8-A). In 2020, other impacts mainly the effects on deferred taxes of the lower income tax rates applicable to entities in the French tax consolidation group. (3) The Group’s main taxes based on taxable profits are the CVAE in France and the IRAP in Italy. (4) French tax consolidation group For the French tax consolidation group, the current tax charge amounts to -€43 million, principally consisting of the business tax cotisation sur la valeur ajoutée des entreprises (CVAE), and the deferred tax gain amounts to €176 million, principally due to the lower deferred tax liabilities on capitalized development expenses following a decrease in the base and the tax rate for future years. Entities not in the French tax consolidation group The tax charge for non-French entities principally reflects the discontinuation of the recognition of deferred tax assets on tax losses. Excluding AVTOVAZ, the effective tax rate for these entities was 35% in 2020 (22% for 2019). The increase between 2019 and 2020 in the effective tax rate is mainly explained by the deficits reported in certain subsidiaries, particularly in Brazil and India, without recognition of deferred tax assets on the taxable losses generated in 2020.