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.