Basic tax rules and tax risk management
Fulfilling its tax obligations correctly and fully is an important area of attention. This concerns both corporate income tax and all other taxes that apply to Enexis.
An individual covenant Horizontal Monitoring was concluded with the Dutch Tax and Customs Administration in 2022. In this covenant, Enexis and the Dutch Tax and Customs Administration agreed to base their relationship on transparency, understanding, and trust. Of course, the rights and obligations based on laws and regulations continue to apply without any limitation.
The points of departure with regard to taxation and social security contributions are:
Compliance with laws and regulations: Enexis Groep acts in accordance with the applicable tax laws and regulations. In doing so, Enexis does not make use of unconventional tax structures.
Transparency: The way in which Enexis Groep operates is aimed at maintaining an open, constructive, and respectful relationship with all bodies involved in levying taxation and social security contributions.
In order to realise these objectives use is made of:
A clear assignment of taxation responsibilities within the organisational structure (tax governance);
Up-to-date taxation process descriptions;
Automation and technology for preparing correct and comprehensive tax returns;
The Enexis Internal Control Framework, of which the functioning is assessed twice a year via a Control Self-Assessment (CSA), in which specific identified tax risks and the corresponding mitigating measures have been laid down;
A working relationship with the bodies involved in the levying of taxes and social security contributions that is based on trust, understanding, and transparency; and
Internal and external communication about tax matters with the aim of having contact with employees (and representatives of employees) and other stakeholders about the impact of the levy of taxes and social security contributions on the organisation.
The Dutch Minimum Taxation Act 2024 (Pillar II)
The Dutch Minimum Taxation Act 2024 came into force on 1 January 2024. The law will take effect as of the financial year starting on 1 January 2024. An assessment was performed regarding the impact of this act. It follows from the assessment that:
Enexis Holding N.V. and all of its subsidiaries, as a group within the Netherlands, fall within the scope of this act.
The new act is not expected to lead to additional taxation as the effective tax rate in the sense of the act is higher than 15% or due to ‘actual presence’. If additional taxation should have to take place, then a reduction of additional taxation is included in the act for a period of five years after the act first became applicable.
The additional taxation information tax return must be filed as of the financial year 2024 within the specified period (for the first time no later than 30 June 2026).
Tax groups
Enexis Holding N.V. forms a tax group for corporate income tax together with its subsidiaries. The companies that were members of the tax group at year-end 2023 are: Enexis Netbeheer B.V., Enexis Personeel B.V., Enexis Vastgoed B.V., Enpuls B.V. and Enpuls Projecten B.V. and Mijnwater Warmte Infra B.V. Within this group of companies, the corporate income tax that Enexis Holding N.V. owes the Dutch Tax and Customs Administration is apportioned among the companies included in the tax group based on realised commercial results taking into account the applicable exemptions and non-deductible amounts. In the event of changes in the composition of the tax group, deferred tax items are settled between Enexis Holding N.V. and the relevant group company or companies.
There is also a tax group for turnover tax (VAT) with the exception of Mijnwater Warmte Infra B.V. Companies are jointly and severally liable for the tax liabilities of the tax group over the period in which they belong to the tax group. The turnover tax payable by Enexis Holding N.V. to the Dutch Tax and Customs Administration is settled with the group companies in accordance with the turnover tax owed by each individual company.
Corporate income tax
The business activities of Enexis Groep are subject to corporate income tax. The tax on the result for the reporting period comprises current, offsetable, and deferred corporate income tax. The corporate income tax is included on the income statement, except when it relates to items recognised directly in equity.
Over 2023, corporate income tax amounted to € 16 million (2022: € 61 million).
The corporate income tax can be specified as follows:
|
€ Million |
2023 |
2022 |
|
Current income tax expense |
-32 |
63 |
|
Deferred income tax expense |
48 |
-2 |
|
16 |
61 |
|
|
Current income tax expense prior years |
0 |
0 |
|
Deferred income tax expense prior years |
0 |
0 |
|
Total corporate income tax expense |
16 |
61 |
No corporate income tax was payable over the financial year 2023. This is due to a temporary tax measure in 2023. Under this tax measure, Enexis was able to apply the random depreciation method for investments in its grids in 2023. This resulted in a tax loss in 2023. This loss will be partially settled with corporate income tax paid over 2022. The remaining tax loss in 2023 will be settled in the future with taxable profits.
The corporate income tax was calculated as follows:
|
€ Million |
2023 |
2022 |
|
Profit before tax |
88 |
1,361 |
|
Income tax exempt result under the participation exemption from sale of Fudura B.V. |
0 |
-1,113 |
|
Non-taxable results and non-deductible expenses |
2 |
0 |
|
Permanent differences between the taxable and commercial results (i.a. energy- and environmental investment deduction) |
-19 |
-10 |
|
Profit for calculation of corporate income tax expense |
71 |
238 |
|
Tax on current year |
18 |
61 |
|
Utilisation of previously unrecognised tax losses |
-2 |
0 |
|
Corporate income tax current year |
16 |
61 |
|
Adjustment(s) for preceding years |
0 |
0 |
|
Total corporate income tax |
16 |
61 |
The Tax and Customs Administration determined the loss incurred by Mijnwater Warmte Infra B.V. before it had been incorporated in the tax group definitely in 2023. Enexis expects to be able to settle this definite loss with future stand-alone profits of Mijnwater Warmte Infra B.V.
The permanent differences between the calculation of the commercial result and the result for tax purposes are largely caused by the use of the investment schemes for tax deductions for energy and environment investments. Investing in sustainable and environmentally-friendly assets resulted in a tax deduction item of € 18 million by making use of these investment schemes (2022: € 9 million).
There were no uncertain tax liabilities arising from previous years as at year-end 2023.
The reconciliation of the statutory income tax rate with the reported income tax rate (€ 16 million), expressed as a percentage of profit before tax (€ 88 million), was as follows:
|
2023 |
2022 |
|
|
Nominal statutory corporate income tax rate in the Netherlands |
25.8% |
25.8% |
|
Effect from non-taxable result from sale of Fudura B.V. |
0.0% |
-21.1% |
|
Effect from non-taxable results and non-deductable expenses |
0.6% |
0.0% |
|
Effect of permanent differences between the calculation of the taxable and commercial result |
-5.6% |
-0.2% |
|
Effect of adjustments for preceding years |
-0.7% |
0.0% |
|
Effect of Utilisation of previously unrecognised tax losses |
-2.4% |
0.0% |
|
Effective tax rate1 |
17.7% |
4.5% |
- 1Total corporate income tax as a percentage of profit before tax excluding rounding.
The tax-exempt proceeds of the sale of Fudura B.V. had a large effect on the effective tax rate in accordance with IAS 12 over 2022. If the result of the sale of Fudura B.V. is not taken into account then the effective tax rate in accordance with IAS 12 over 2022 would have amounted to 24.8%.