Income tax is computed in accordance with the tax legislation in force in the countries where the income is taxable. In accordance with IAS 12, deferred tax is recognised on the temporary differences between the carrying amount and the tax base of assets and liabilities. It is calculated using the latest tax rates enacted or substantively enacted at the accounts closing date. The effects of a change in the tax rate from one period to another are recognised in the income statement in the period in which the change was decided, except where they relate to transactions recognised under other comprehensive income or directly in equity.
Deferred tax relating to share-based payments is taken to income to the extent that the deductible amount does not exceed the fair value of plans established according to IFRS 2.
Whenever subsidiaries have distributable reserves, a deferred tax liability is recognised in respect of the probable distributions that will be made in the foreseeable future. Moreover, shareholdings in associates and certain joint ventures give rise to recognition of a deferred tax liability in the event of differences between the carrying amount and the tax base of the shares.
Net deferred tax is determined on the basis of the tax position of each entity or group of entities included in the tax group under consideration and is shown under assets or liabilities for its net amount per tax group. Deferred tax is reviewed at each balance sheet date to take account of the impact of changes in tax law and the prospect of recovery. Deferred tax assets are only recognised if their recovery is probable. Deferred tax assets and liabilities are not discounted.
| (in € millions) | 2021 | 2020 |
|---|---|---|
| Current tax | Current tax 2021(1,509) |
Current tax 2020 (844) |
| Deferred tax of which temporary differences of which losses carried forward |
Deferred tax of which temporary differences of which losses carried forward 2021 (116) (214) 98 |
Deferred tax of which temporary differences of which losses carried forward 2020 37 (48) 85 |
| (in € millions)Total | 2021(1,625) | 2020 (807) |
The net tax expense for the period comprises:
The Group’s effective tax rate was 42.7% in 2021 compared with 41.0% in 2020.
Excluding non-recurring items:
The Group’s effective tax rate for 2021 is higher than the theoretical tax rate of 27.37% in force in France, due to the tax rate differential on foreign income and because French subsidiaries with revenue of over €250 million are taxed at 28.41%. The difference between the tax calculated using the standard tax rate in force in France and the amount of tax effectively recognised in the year can be analysed as follows:
| (in € millions) | 2021 | 2020 |
|---|---|---|
| Income before tax and profit/(loss) of companies accounted for under the equity method | Income before tax and profit/(loss) of companies accounted for under the equity method 20213,808 |
Income before tax and profit/(loss) of companies accounted for under the equity method 2020 1,969 |
| Theoretical tax rate in France | Theoretical tax rate in France 202127.4% |
Theoretical tax rate in France 2020 28.9% |
| Theoretical tax expense expected | Theoretical tax expense expected2021(1,042) | Theoretical tax expense expected 2020 (569) |
| Tax rate differential on foreign income of which impact from revaluing deferred tax in the United Kingdom |
Tax rate differential on foreign income of which impact from revaluing deferred tax in the United Kingdom2021 (403) (387) |
Tax rate differential on foreign income of which impact from revaluing deferred tax in the United Kingdom 2020 (144) (100) |
| Impact of tax loss carryforwards and other temporary differences that are not recognised orthat have previously been subject to limitation of which impact from revaluing deferred tax in the United Kingdom |
Impact of tax loss carryforwards and other temporary differences that are not recognised orthat have previously been subject to limitation of which impact from revaluing deferred tax in the United Kingdom2021 (40) (7) |
Impact of tax loss carryforwards and other temporary differences that are not recognised orthat have previously been subject to limitation of which impact from revaluing deferred tax in the United Kingdom 2020 (54) - |
| Goodwill impairment losses | Goodwill impairment losses 2021(5) |
Goodwill impairment losses 2020 (25) |
| Permanent differences and other (*) | Permanent differences and other (*)2021(134) |
Permanent differences and other (*)2020 (15) |
| Tax expense recognised | Tax expense recognised2021(1,625) | Tax expense recognised 2020 (807) |
| Effective tax rate (**) | Effective tax rate (**)202142.7% | Effective tax rate (**) 2020 41.0% |
(*) Including €35 million of current tax related to the different tax rate applied to French companies with revenue of over €250 million.
(**) Excluding the Group’s share of companies accounted for under the equity method.
