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11 Income taxes

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Under management agreements, all earnings of KPMG N.V. are distributed to the partners, through Coöperatie KPMG U.A., who pay tax on these earnings. The Group has a ruling for corporate income tax purposes, under which total net income before tax is subject to corporate income tax at the level of Coöperatie KPMG U.A., KPMG N.V. and the practice companies of the individual equity partners. Consequently, income taxes payable by the Group itself are limited and determined by applying a formula.

Tax on the profit share of KPMG N.V. is calculated using the average tax rate applicable to the year. For 2020/2021, the average tax rate was 24.7% (2019/2020: 24.4%).

The table below provides a reconciliation between accounting profit and taxable profit.

EUR 000

2020/2021

2019/2020

Profit before tax

111,490

61,702

Expenses related to early retired partners

-1,436

-2,995

Tax-exempt income

-197

-4,550

Non-deductible expenses

1,433

2,535

Temporary differences

-412

-2,478

Taxable profit

110,878

54,214

   

Of which taxable by:

  

KPMG N.V.

6,217

2,521

Coöperatie KPMG U.A.

1,016

983

Practice companies of the individual equity partners

103,645

50,710

11.1 Amounts recognised in profit or loss

EUR 000

2020/2021

2019/2020

Current tax expense

  

Current year

1,532

615

Adjustments for prior years

2

-29

 

1,534

586

   

Deferred tax expense

  

Recognised deductible temporary differences

-259

232

Tax expense on continuing operations

1,275

818

11.2 Movement in deferred tax balances

EUR 000

Net balance at 1 October

Recognised in profit or loss (see 11.1)

Net balance at 30 September

Deferred tax asset

Deferred tax liability

2019/2020

     

Intangible assets

-159

159

Property plant and equipment

2,786

-476

2,310

2,310

Jubilee benefits

147

63

210

210

Lease liabilities

22

22

22

Deferred tax balance

2,774

-232

2,542

2,542

      

2020/2021

     

Intangible assets

Property plant and equipment

2,310

-333

1,977

1,977

Jubilee benefits

210

35

245

245

Lease liabilities

22

557

579

579

Deferred tax balance

2,542

259

2,801

2,801

The key factors that determine the valuation of deferred tax assets are the probability of future taxable profits, the tax rates that are expected to be applied to temporary differences when they reverse and the assumption that it is expected that the carrying amount can be recovered. An increase of EUR 362 of the amount recognised in profit or loss relates to changes in enacted or substantially enacted tax rates (2019/2020: an increase of EUR 183).

11.3 Current tax balances

As of financial year 2014/2015, Coöperatie KPMG U.A. is head of the fiscal unity for income tax purposes. For this reason, current tax balances only relate to group companies that are not included in the fiscal unity, as well as adjustments related to previous years.