C10. Income taxes

Tax items recognized in comprehensive income and directly in equity

Tax items recognized in comprehensive income and directly in equity were distributed as follows.

SEK in millions

Jan–Dec 2015

Jan–Dec 2014

Tax items recognized in net income

   

Current tax expense relating to current year

-1,391

-1,680

Underprovided or overprovided current tax expense in prior years

-17

-5

Deferred tax expense originated or reversed in current year

-666

-1,168

Recognition of previously unrecognized deferred taxes

-55

-45

Effect on deferred tax from changes in tax rates

-28

-91

Total tax expense recognized in net income

-2,157

-2,989

Tax items recognized in other comprehensive income

   

Current tax relating to current year

-538

870

Deferred tax originated or reversed in current year

-1,051

845

Total tax recognized in other comprehensive income

-1,589

1,715

Tax items recognized directly in equity

   

Deferred tax related to treasury share repurchase made by associated company

10

Total tax recognized directly in equity

10

Pre-tax income was SEK 11,689 million in 2015 and SEK 15,209 million in 2014. The difference between the nominal Swedish income tax rate and the effective tax rate comprises the following components.

Percent

Jan–Dec 2015

Jan–Dec 2014

Swedish income tax rate

22.0

22.0

Effect of higher or lower tax rates in subsidiaries

-0.2

-0.2

Withholding tax on earnings in subsidiaries and associated companies

-1.7

2.4

Underprovided or overprovided current tax expense in prior years

0.1

0.0

Recognition of previously unrecognized deferred taxes

0.5

0.4

Effect on deferred tax expense from changes in tax rates

0.2

0.6

Income from associated companies

-6.5

-6.6

Current year losses for which no deferred tax asset was recognized

0.1

0.6

Non-deductible expenses

5.7

1.5

Tax-exempt income

-1.7

-1.0

Effective tax rate in net income

18.5

19.7

Effective tax rate excluding effects from associated companies

26.8

23.9

Withholding tax on earnings in subsidiaries and associated companies is impacted by an intra-group restructuring in 2015. The intragroup restructuring resulted in a revaluation and one-off effect of the withholding tax provision and a decrease of the deferred tax liability. Non-deductible expenses are impacted by non-tax deductible goodwill impairment in Denmark.

Recently enacted changes in tax legislation affecting TeliaSonera were as follows.

Country

Enacted

Change in corporate income tax legislation

Effective

Denmark

June 2013

Tax rate has gradually decreased from 25.0 percent to 24.5 percent on January 1, 2014, 23.5 percent in 2015 and 22.0 percent from 2016.

 

January 1, 2014/ 2015/2016

Finland

December 2013

Tax rate cut from 24.5 percent to 20.0 percent.

 

January 1, 2014

Norway

December 2013/2015

Tax rate cut from 28.0 percent to 27.0 percent in 2014 with a further reduction to 25.0 percent in 2016.

 

January 1, 2014/2016

Spain

July 2012/
October 2013/
November 2014

Tax rate cut from 30.0 percent to 28.0 percent in 2015 and 25.0 percent in 2016. If turnover exceeds EUR 60 million, a maximum of 25.0 percent of taxable income as of 2012 could be offset against accumulated tax losses in previous years. The temporary limitations were valid until 2013 and has been prolonged until 2015. The level of utilization increases to 60 percent in 2016 and to 70 percent in 2017 and beyond. The utilization period for tax losses are limited to 18 years but from 2015 the limitation of the tax loss utilization period cease to exist and the tax losses are no longer time restricted.

 

January 1, 2012/2014/2015/

2016/2017

United Kingdom

July 2012/2013

Tax rate cut from 23.0 percent in 2013 to 21.0 percent in 2014 and with a further reduction to 20.0 percent in 2015.

 

April 1, 2014/2015

Uzbekistan

December 2013/2014

Tax rate cut from 9.0 percent to 8.0 percent in 2014 with a further reduction to 7.5 percent in 2015.

 

January 1, 2014/2015

The reduction of the Norwegian and Spanish corporate income tax rate effective from January 1, 2016 and January 1, 2015, triggered a recalculation of existing deferred tax assets and liabilities in TeliaSonera’s Norwegian and Spanish operations, resulting in a net deferred tax expense of SEK 28 million in 2015 and SEK 91 million in 2014.

Deferred tax assets and liabilities

Deferred tax assets and liabilities changed as follows.

SEK in millions

Dec 31, 2015

Dec 31, 2014

Deferred tax assets

   

Opening balance

5,955

5,493

Comprehensive income period change

-1,418

-121

Operations acquired

1,054

0

Reversals of offset tax liabilities/assets, other reclassifications

-256

263

Exchange rate differences

-173

320

Reclassification to assets classified as held for sale

-108

Deferred tax assets, closing balance

5,054

5,955

Deferred tax liabilities

   

Opening balance

10,840

10,063

Comprehensive income period change

850

222

Change of withholding taxes recognized directly in equity

-10

Operations acquired

743

69

Reversals of offset tax assets/liabilities, other reclassifications

-158

332

Exchange rate differences

-403

164

Reclassification to liabilities directly associated with assets classified as held for sale

-1,245

Deferred tax liabilities, closing balance

10,627

10,840

 

Temporary differences in deferred tax assets and liabilities were as follows.

SEK in millions

Dec 31, 2015

Dec 31, 2014

Gross deferred tax assets

   

Delayed depreciation, impairment losses and fair value adjustments, other non-current assets

3,283

3,837

Delayed expenses for provisions

1,033

1,505

Doubtful current receivables

115

213

Interest expense carry-forwards

92

Tax loss carry-forwards, continuing operations

4,308

4,433

Tax loss carry-forwards reclassification to assets classified as held for sale

440

Subtotal

9,271

9,988

Valuation allowances

   

Delayed depreciation, other non-current assets

-4

-5

Doubtful current receivables

-17

-17

Tax loss carry-forwards, continuing operations

-3,192

-3,519

Tax loss carry-forwards reclassification to assets classified as held for sale

-407

Subtotal

-3,620

-3,541

Offset deferred tax liabilities/assets

-489

-492

Reclassification to assets classified as held for sale

-108

Total deferred tax assets

5,054

5,955

Deferred tax liabilities

   

Withholding taxes subsidiaries and associated companies

1,561

2,469

Accelerated depreciation and fair value adjustments, other non-current assets

6,637

5,755

Fair value adjustments, provisions

1,354

534

Delayed revenue recognition, current receivables

13

32

Profit equalization reserves

2,796

2,542

Subtotal

12,361

11,332

Offset deferred tax assets/liabilities

-489

-492

Reclassification to liabilities associated with assets classified as held for sale

-1,245

Total deferred tax liabilities

10,627

10,840

Net deferred tax assets (+)/liabilities (-)

-5,573

-4,885

Net increase (+)/decrease (-) in valuation allowance

79

-314

Unrecognized deferred tax assets, as reflected by the valuation allowance at December 31, 2015, were expected to expire as follows.

Expected expiry, SEK in millions

2016

2017

2018

2019

2020

2021-2024

Unlimited

Total

Unrecognized deferred tax assets

1

0

0

81

3,110

3,192

As of December 31, 2015 and 2014, unrecognized deferred tax liabilities for undistributed earnings in subsidiaries, including estimated such income tax that is levied on dividends paid, totaled SEK 122 million and SEK 96 million, respectively.

Tax loss carry-forwards

Deferred tax assets originating from tax loss carry-forwards mainly relate to Spain, the international carrier operations and Norway. Tax losses in Spain refer to the Spanish 3G and 4G mobile network operator Xfera Móviles S.A. (Yoigo), acquired in 2006. Xfera has reported tax losses since its incorporation in 2000, due to annual spectrum fees paid to the Spanish government, depreciation and write-downs of earlier investments, other pre-operating costs and additional operating losses incurred thereafter. As of December 31, 2015, Xfera had tax losses and taxable temporary differences totaling SEK 11.8 billion.

Under current market conditions and due to the decreases in equipment prices in the past few years, management is, however, confident that Xfera will be able to generate taxable profits, and has prepared a business plan based on a thorough business model with detailed and benchmarked data, and has also convinced other parties to invest alongside TeliaSonera. As a result, management believes that the current non-time restricted tax losses will be utilized. However, management acknowledges that the threshold for recognizing deferred tax assets in a situation of recurring historical losses is higher than for other assets, and has therefore reduced its projections to a level which it is convinced that Xfera will reach. As of December 31, 2015, based on these projections, management has recognized a deferred tax asset of SEK 463 million after valuation allowance.

Tax losses in the international carrier operations refer mainly to impairment losses on plant and machinery incurred in 2002. Most of these tax losses have no expiry dates.

Tax losses in Norway have no expiry dates and are related to the Norwegian companies acquired from Tele2 Norway.

TeliaSonera’s accumulated tax loss carry-forwards were SEK 16,662 million in 2015 and SEK 16,008 million in 2014. Tax loss carry-forwards as of December 31, 2015, were expected to expire as follows:

Expected expiry, SEK in millions

2016

2017

2018

2019

2020

2021-2035

Unlimited

Total

Tax loss carry-forwards

4

0

0

0

626

16,032

16,662

© TeliaSonera 2015
In the event of any differences between this online version of the Annual and sustainability report and the printed version, the printed version shall prevail.