G11 Income tax

Recognized in profit and loss

Income tax expense for the year	2019	2020
Current tax	–4,112	–3,373
Adjustment of taxes attributable to prior years	95	190
Total current tax expense	–4,017	–3,183
Deferred taxes relating to temporary differences and tax losses carried forward	596	666
Total tax expense	–3,421	–2,517

The Group’s recognized tax expense for the continuing operations for the year amounted to SEK 2,517 million (3,421) or 22.3 percent (28.2) of profit after net financial items.

Reconciliation of the tax expense

The Group’s weighted average tax rate for the continuing operations, calculated in accordance with the statutory tax rates in each country, is 21.9 percent (22.6). The tax rate in Sweden is 21.4 percent (21.4). Reconciliation of the Group’s weighted average tax rate, based on the tax rates in each country, and the Group’s actual tax expense:

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	2019		2020
	MSEK	%	MSEK	%
Profit after net financial items	12,150		11,270
Weighted average tax based on each country’s tax rate	–2,744	–22.6	–2,469	–21.9

Tax effect of
Non-deductible expenses	–767	–6.3	–231	–2.0
Tax-exempt income	31	0.2	48	0.4
Adjustments relating to prior years	95	0.8	190	1.7
Effects of tax losses carried forward, net	13	0.1	–20	–0.2
Other	–49	–0.4	–35	–0.3
Total recognized tax expense	–3,421	–28.2	–2,517	–22.3

Tax items attributable to other comprehensive income

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	2019			2020
	Before tax	Tax	After tax	Before tax	Tax	After tax
Actuarial gains (losses) attributable to defined– benefit pension plans	–1,638	323	–1,315	–1,146	225	–921
Translation differences for the year	1,880	–	1,880	–4,754	–	–4,754
Fair–value changes in cash flow hedges for the year	30	–9	21	28	–8	20
Fair–value changes in cash flow hedges carried forward to profit (loss) for the year	–2	1	–1	0	0	0
Other comprehensive income	270	315	585	–5,872	217	–5,655

Recognized in the balance sheet

Deferred tax assets and liabilities

The deferred tax assets and liabilities recognized in the balance sheet are attributable to the following assets and liabilities.

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2019

2020

Deferred tax assets

Deferred tax liabilities

Net

Deferred tax assets

Deferred tax liabilities

Net

1)	Mainly related to pensions.
2)	Mainly related to provisions.

Intangible assets

184

–1,466

–1,282

197

–1,445

–1,248

Property, plant and equipment

250

–1,612

–1,362

200

–1,475

–1,275

Financial non-current assets

184

–149

173

–129

Inventories

961

–94

867

853

–52

801

Receivables

170

–107

122

–91

Interest-bearing liabilities¹⁾

1,632

1,851

–6

1,845

Non-interest-bearing liabilities²⁾

1,304

–26

1,278

1,446

–28

1,418

Other

–

Tax losses carried forward

252

–

252

386

–

386

Interest expenses carried forward

–

Total

4,952

–3,454

1,498

5,265

–3,226

2,039

Offsetting within companies

–1,155

1,155

–

–1,167

1,167

–

Total deferred tax assets and liabilities

3,797

–2,299

1,498

4,098

–2,059

2,039

Unrecognized deferred tax assets

The Group has additional tax losses carried forward of SEK 2,195 million (2,595). The main part of the change for 2020 relates to revaluation and expiry of tax losses in prior years in Brazil, Chile and China. No deferred tax asset was recognized for these losses.

The expiry dates of these tax losses carried forward are distributed as follows:

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Year	MSEK
2021	77
2022	22
2023	35
2024	17
2025	40
No expiry date	2,004
Total	2,195

Related deferred tax assets were not recognized since utilization of the tax losses against future taxable profits is not deemed probable in the foreseeable future. The tax value of the unrecognized tax losses carried forward amounted to SEK 639 million (750).

Change of deferred tax in temporary differences and unused tax losses

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	2019	2020
Balance at the beginning of the year, net	765	1,498
Recognized in profit and loss	596	666
Acquisitions/disposals of subsidiaries	–146	–202
Recognized in other comprehensive income	315	217
Translation differences	44	–136
Reclassifications	–76	–4
Balance at end of year, net	1,498	2,039

In addition to the deferred tax assets and liabilities, Sandvik reports the following tax liabilities and receivables:

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	2019	2020
Income tax liabilities	–3,744	–2,695
Income tax receivables	1,403	676
Net tax liabilities/receivables	–2,341	–2,019

Accounting principles

Income tax

Income tax comprises current and deferred tax. Income tax is recognized in profit or loss for the year except when the underlying transaction is recognized in other comprehensive income. In these cases, the associated tax effects are recognized in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect to previous years.

Current tax liabilities are offset against current tax receivables and deferred tax assets are offset against deferred tax liabilities when the entity has a legal right to offset these items and intends to do so.

Deferred tax is recognized based on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their value for tax purposes. Deferred taxes are measured at their nominal amount and based on the expected manner of realization or settlement of the carrying amount of the underlying assets and liabilities, using tax rates and fiscal regulations enacted or substantively enacted at the balance sheet date.

Deferred tax assets relating to deductible temporary differences and tax losses carried forward are recognized only to the extent that it is probable they can be utilized against future taxable profits.

Critical estimates and key judgments

Income tax

Significant estimates are made to determine both current and deferred tax liabilities/assets, not least the value of deferred tax assets.

The actual results may differ from these estimates, for instance due to changes in the business climate, changed tax legislation, or the outcome of the final review by tax authorities and tax courts of tax returns.

The recognized provision for ongoing tax litigations and other uncertainties amounted to SEK 1,267 million (1,454) and is as previously based on management´s best estimate of the outcome.