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Integrated Report of KGHM Polska Miedź S.A.
and the KGHM Polska Miedź S.A. Group
for 2020

5.1.1 Deferred income tax

in PLN millions, unless otherwise stated

Deferred income tax is determined using tax rates and tax laws that are expected to be applicable when the asset is realised or the liability is settled based on tax rates and tax laws that have been enacted or substantively enacted at the end of the reporting period.

Deferred tax liabilities and deferred tax assets are recognised
for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the exception of temporary differences arising from initial recognition of assets or liabilities in transactions other than business combinations, which do not have an impact either on profit/(loss) before tax or on the taxable profit/(tax loss) at the moment they are concluded.

Deferred tax assets are recognised if it is probable that taxable profit will be available against which the deductible temporary differences and unused tax losses can be utilised.

Deferred tax assets and deferred tax liabilities are offset if the company has a legally enforceable right to set off current tax assets and current tax liabilities, and if the deferred tax assets and deferred tax liabilities relate to income taxes levied on a given entity by the same tax authority.

The probability of realising deferred tax assets with future tax income is based on the budgets of the companies of the Group. Companies of the Group recognised deferred tax assets in their accounting books to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised.

Companies of the Group which historically have generated losses, and whose financial projections do not foresee the achievement of taxable profit enabling the deduction of deductible temporary differences, do not recognise deferred tax assets in their accounting books.

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from 1 January 2020
to 31 December 2020		 from 1 January 2019
to 31 December 2019
Deferred net income tax at the beginning of the period, of which: (288) (189)
Deferred tax assets 157 309
Deferred tax liabilities (445) (498)
Change in accounting policies
application of IFRS 16 of which: – –
Deferred tax assets – 64
Deferred tax liabilities – (64)
Deferred income tax after change in policies, of which: (288) (189)
Deferred tax assets 157 373
Deferred tax liabilities (445) (562)
Deferred income tax during the period: 39 ( 99)
Recognised in profit or loss (191) (168)
Recognised in correspondence with current tax assets* – (34)
Recognised in other comprehensive income 226 102
Exchange differences from translation of foreign operations statements with a functional currency other than PLN 4 1
Deferred net income tax at the end of the period, of which: (249) (288)
Deferred tax assets 193 157
Deferred tax liabilities (442) (445)
* The amount: PLN (34) million in 2019 concerns deferred tax assets reclassified to current tax assets due to the tax credit used by the KGHM INTERNATIONAL LTD. Group as a result of a tax reform in the USA

 

Maturities of deferred tax assets and deferred tax liabilities were as follows:

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Deferred tax assets Deferred tax liabilities
As at
31 December 2020		 As at
31 December 2019		 As at
31 December 2020		 As at
31 December 2019
Maturity over the 12 months from the end of the reporting period 101 72 (791) (736)
Maturity of up to 12 months from the end of the reporting period 92 85 349 291
Total 193 157 (442) (445)

 

Expiry dates of unused tax losses and tax credits, for which deferred tax assets were not recognised in individual countries, are presented in the following table:

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As at 31 December 2020 As at 31 December 2019
Unused tax losses Expiry date Unused tax credits Expiry date Unused tax losses Expiry date Unused tax credits Expiry date
Luxemburg 2 442 indefinite – – 2 467 indefinite – –
1 282 2034-2037 – – 873 2034-2036 – –
Chile 975 indefinite – – 894 indefinite – –
Canada 1 127 2026-2039 43 2030-2039 992 2026-2039 61 2020-2038
Other 135 2021-2037 – – 148 2034-2037 – –
TotL 5 961 43 5 374 61

 

As at 31 December 2020,  the amount of deductible temporary differences in respect of which the Group did not recognise a deferred tax asset amounted to PLN 2 575 million (as at 31 December 2019: PLN 3 610 million).

 As at 31 December 2020, at the level of the consolidated financial statements, there was no recognition of deferred tax liabilities on taxable temporary differences in the amount of PLN 806 million (as at 31 December 2019: PLN 958 million) related to investments in subsidiaries and shares in joint ventures, as the conditions stipulated in IAS 12.39 were met.

The following tables present deferred income tax assets and liabilities before their compensation at the level of individual companies of the Group.

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Deferred tax assets (deferred tax assets prior to offsetting with deferred tax liabilities at the level of individual companies of the Group)

Credited/(Charged) Credited/(Charged)
As at
31 December 2018		 Change in accounting policies – application of IFRS 16 As at
1 January 2019		 profit or loss other comprehensive income and current tax assets exchange differences from translation of foreign operations statements with a functional currency other than PLN As at
31 December 2019		 exchange differences from translation of foreign operations statements with a functional currency other than PLN As at
31 December 2019		 profit or loss other comprehensive income exchange differences from translation of foreign operations statements with a functional currency other than PLN As at
31 December 2020
Provision for decommissioning of mines and other technological facilities 211 – 211 29 – – 240 – 240 13 – – 523
Measurement of forward transaction other than hedging instruments 14 – 14 7 – – 21 – 21 15 – – 36
Difference between the depreciation rates of property, plant and equipment for accounting and tax purposes 61 – 61 6 – – 67 – 67 13 – – 80
Future employee benefits 497 – 497 18 10 – 525 – 525 13 62 – 600
Equity instruments measured at fair value 122 – 122 – 18 – 140 – 140 – (36) – 104
Lease liabilities – 64 64 (1) – – 63 – 63 (2) – – 61
Interest 106 – 106 51 – – 157 – 157 43 – (3) 197
Recognition/reversal of impairment losses on assets 63 – 63 (32) – – 31 – 21 13 – – 44
Short-term accruals for remuneration 55 – 55 17 – – 72 – 72 24 – – 96
Re-measurement of hedging instruments 25 – 25 – 10 – 35 – 35 – 200 – 235
Liabilities related to fixed fee due to setting mining usufruct 37 – 37 (6) – – 31 – 31 (1) – – 30
Other 439 – 439 (153) (34)* 2 254 – 254 7 – – 261
Total 1 630 64 1 694 (64) 4 2 1 636 – 1 636 138 226 (3) 1 997
* deferred tax assets reclassified to current tax assets due to the tax credit used by the KGHM INTERNATIONAL LTD. Group as a result of a tax reform in the USA

 

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Deferred tax liabilities (deferred tax liabilities prior to offsetting with deferred tax assets at the level of individual companies of the Group)

(Credited)/Charged (Credited)/Charged
As at 31 December 2018 Change in accounting policies – application of IFRS 16 As at
1 January 2019		 profit or loss other comprehensive incom exchange differences from translation of foreign operations statements with a functional currency other than PLN As at
31 December 2019		 exchange differences from translation of foreign operations statements with a functional currency other than PLN As at
31 December 2019		 profit or loss other comprehensive income exchange differences from translation of foreign operations statements with a functional currency other than PLN As at
31 December 2020
Measurement of forward transactions other than hedging instruments 16 – 16 1 – – 17 – 17 18 – – 35
Re-measurement of hedging instruments 64 – 64 – (64) – – – – – – – –
Difference between the depreciation rates for accounting and tax purposes, including: 1 228 64 1 292 117 – 2 1 411 – 1 411 106 – (3) 1 514
related to amortisation of right-to-use (IFRS 16) – 64 64 1 – – 65 – 65 (5) – – 60
Accrued interest 309 – 309 53 – (1) 361 – 361 113 – (4) 470
Other 202 – 202 (67) – – 135 – 135 92 – – 227
Total 1 819 64 1 883 104 (64) 1 1 924 – 1 924 329 – (7) 2 246
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5.1 Income tax in the consolidated statement of profit or loss
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