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 recognised only to the extent that recovery is probable; an impairment allowance is recognised otherwise. Deferred tax assets and liabilities are not discounted.
| (in € millions) | 2023 | 2022 |
|---|---|---|
| Current tax | Current tax 2023 (2,332) |
Current tax 2022 (1,809) |
| Deferred tax | Deferred tax 2023 415 |
Deferred tax 2022 72 |
| of which temporary differences | of which temporary differences 2023 375 |
of which temporary differences 2022 102 |
| of which tax loss carry forwards | of which tax loss carry forwards 2023 40 |
of which tax loss carry forwards 2022 (29) |
| Total | Total 2023 (1,917) |
Total 2022 (1,737) |
The net tax expense for the period comprises:
The Group’s effective tax rate was 27.7% in 2023, compared with 28.3% in 2022. In 2023, the effective tax rate was 28.7% in France and 26.6% outside France. Excluding the remeasurement of the Cobra IS earn-out, the change in fair value of ADP shares (taxed at a reduced rate) and adjustments to current and deferred tax, the rate in France would be 26.5%.
The Group’s effective tax rate for 2023 was higher than the theoretical tax rate of 25.83% in force in France, because of permanent differences and the impact of different tax rates applicable to companies operating in other countries. 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) | 2023 | 2022 |
|---|---|---|
| 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 20236,909 |
Income before tax and profit/(loss) of companies accounted for under the equity method 20226,131 |
| Theoretical tax rate in France | Theoretical tax rate in France 202325.8% |
Theoretical tax rate in France 202225.8% |
| Theoretical tax expense expected | Theoretical tax expense expected2023(1,785) | Theoretical tax expense expected2022(1,584) |
| Tax rate differential on foreign income | Tax rate differential on foreign income 2023(59) |
Tax rate differential on foreign income 2022(2) |
| Impact of tax loss carryforwards and other temporary differencesthat are not recognised or that have previously been subject to limitation | Impact of tax loss carryforwards and other temporary differencesthat are not recognised or that have previously been subject to limitation 2023(9) |
Impact of tax loss carryforwards and other temporary differencesthat are not recognised or that have previously been subject to limitation 2022(96) |
| Goodwill impairment losses | Goodwill impairment losses 2023(2) |
Goodwill impairment losses 2022- |
| Permanent differences and other | Permanent differences and other 2023(62) |
Permanent differences and other 2022(56) |
| Tax expense recognised | Tax expense recognised2023(1,917) | Tax expense recognised2022(1,737) |
| Effective tax rate (*) | Effective tax rate (*) 202327.7% | Effective tax rate (*) 202228.3% |
(*) Excluding the Group’s share of companies accounted for under the equity method.
