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

5.1 Income tax in the consolidated statement of profit or loss

in PLN millions, unless otherwise stated

Income tax recognised in profit or loss comprises current income tax and deferred income tax.

Current income tax is calculated in accordance with current tax laws.

On the basis of an agreement entered into on 25 October 2018, a Tax Group “PGK KGHM II” was established for a period of 3 tax years, that is from 2019 to 2021. It is the second Tax Group founded within the KGHM Polska Miedź S.A. Group. The “PGK KGHM I” Tax Group operated in the years 2016-2018. Real benefits were noted in the period of operation of the first PGK KGHM, including the possibility of current utilisation of losses generated by some of the companies within PGK to settle them with the profits of other companies, and the positive result of an analysis of companies of the KGHM Group with respect to meeting the criteria indicated in the act on the corporate income tax were a basis to found a new tax group – PGK KGHM II.

PGK KGHM II is comprised of:

  1. KGHM Polska Miedź S.A.
  2. Energetyka sp. z o.o.
  3. Zagłębie Lubin S.A.
  4. Miedziowe Centrum Zdrowia S.A.
  5. KGHM CUPRUM sp. z o.o. – Centrum Badawczo-Rozwojowe
  6. INOVA Centrum Innowacji Technicznych sp. z o.o.
  7. PeBeKa S.A.
  8. KGHM ZANAM S.A.
  9. POL-MIEDŹ TRANS Sp. z o.o./ PMT Linie Kolejowe 2 Sp. z o.o./ PMT Linie Kolejowe  Sp. z o.o.
  10. Mercus Logistyka sp. z o.o.
  11. KGHM Metraco S.A.
  12. special purpose companies: Future 1 Sp. z o.o., Future 3 Sp. z o.o., Future 4 Sp. z o.o., Future 5 Sp. z o.o.,
  13. KGHM Centrum Analityki Sp. z o.o.
  14. Centrum Badań Jakości Sp. z o.o.
  15. BIPROMET S.A.
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Income tax

from 1 January 2020
to 31 December 2020		 from 1 January 2019
to 31 December 2019
Current income tax 770 693
[Note 5.1.1] Deferred income tax 191 168
Tax adjustments for prior periods (2) (160)
Income tax 959 701

 

Current tax adjustments for prior periods, recognised in the statement of profit or loss for 2019, concern CIT adjustments for 2016 – 2018, prepared and settled with the tax office. The tax adjustment was prepared because, among others, the Parent Entity recognised the following expenses as tax deductible costs:

  • expenditures incurred due to changes introduced to plans involving the reclassification of land, on which an investment is being advanced – these are expenses related, among others, to excluding land from agricultural and forestry production, and one-off compensations for premature forestry logging,
  • to obtain a concession for the exploration, evaluation and mining of minerals,
  • expenditures on components and major overhauls,
  • expenditures on the exploration for and evaluation of mineral deposits.

These expenses were recognised in the Parent Entity’s adjustment of the annual tax return as tax deductible costs after receiving positive judgments of the Administrative Court issued due to the Parent Entity’s complaints regarding negative interpretations of the Director of the National Revenue Administration.

In 2020, Group entities paid income tax in the amount of PLN 667 million (in 2019: PLN 410 million) to the appropriate tax offices.

The table below presents differences between income tax from profit before income tax for the Group and the income tax which could be achieved if the Parent Entity’s tax rate was applied:

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Reconciliation of effective tax rate

from 1 January 2020
to 31 December 2020		 from 1 January 2019
to 31 December 2019
Profit before income tax 2 756 2 122
Tax calculated using the Parent Entity’s rate
(2020: 19%, 2019: 19%)		 524 403
Effect of applying other tax rates abroad (57) (43)
Tax effect of non-taxable income (39) (93)
Tax effect of expenses not deductible for tax purposes, including: 441 478
the minerals extraction tax, which is not deductible for corporate income tax purposes 309 289
Deductible temporary differences in respect of which tax assets were not recognised 117 101
Utilisation in the period of previously-unrecognised tax losses (22) (2)
Adjustments of current income tax for prior periods (2) (160)
Tax losses and tax credits in the period from which there was no recognition of deferred tax assets 135 112
Deferred tax on eliminated interest on intra-Group loans (110) (100)
Other (28) 5
Income tax in profit or loss [the effective tax rate amounted to 34.8% of profit before income tax (in 2019: 33.0% of profit before income tax)] 959 701

 

In Poland, tax bodies are empowered to audit tax declarations for a period of five years, although during this period companies may offset tax assets with tax liabilities being the income of the State Treasury (including due to current income tax). In Canada, tax declarations may be audited for a period of three years without the right to offset assets with liabilities due to current income tax.

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5.1.1 Deferred income tax

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