• 5.1 Income tax in the consolidated statement of profit or loss

5.1 Income tax in the consolidated statement of profit or loss

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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.
  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.

On 6 October 2021, an agreement to extend the functioning of PGK KGHM II by 3 more tax years, that is from 2022 to 2024 was signed. The composition of PGK KGHM II did not change.

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Income tax

from 1 January 2021 to 31 December 2021 from 1 January 2020 to 31 December 2020
Current income tax 1 564 770
Note 5.1.1 Deferred income tax 124 191
Tax adjustments for prior periods (19) (2)
Income tax 1 669 959

In 2021, Group entities paid income tax in the amount of PLN 740 million (in 2020: PLN 667 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 2021
to 31 December 2021		 from 1 January 2020
to 31 December 2020
Profit before income tax 7 824 2 756
Tax calculated using the Parent Entity’s rate
(2021: 19%, 2020: 19%)		 1 487 524
Effect of applying other tax rates abroad 118 (57)
Tax effect of non-taxable income (19) (39)
Tax effect of expenses not deductible for tax purposes, including: 798 441
the minerals extraction tax, which is not deductible for corporate income tax purposes 674 309
Deductible temporary differences in respect of which tax assets were not recognised 10 117
Utilisation in the period of previously-unrecognised tax losses (590) (22)
Adjustments of current income tax for prior periods (19) (2)
Tax losses and tax credits in the period from which there was no recognition of deferred tax assets 5 135
Deferred tax on eliminated interest on intra-Group loans (92) (110)
Other (29) (28)
Income tax in profit or loss
[the effective tax rate amounted to 21.3% of profit before income tax (in 2020: 34.8% of profit before income tax)]		 1 669 959

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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