In 2020, tax on profit for the year amounted to EUR 169 million (234 million). The effective tax rate was 22.9% (17.9%). In 2020 and 2019, the effective tax rate was affected by the income not subject to tax from subsidiaries operating in tax free zone. In addition, effective tax rate was affected by German tax rate that is higher than in Finland and the loss of France subsidiary for which no deferred tax assets were recognised due to uncertainty of their utilisation. In 2020, accrued and paid withholding taxes relating to dividend payments of subsidiaries amounted to EUR 9 million (EUR 2 million). In 2020, tax losses with no tax benefit mainly relate to the losses resulting from the closure of UPM Chapelle paper mill in France. In 2019, change in recoverability of deferred tax assets included EUR 15 million tax income related to reassessment of deferred tax assets in Germany. Income tax
The group is subject to income taxes in numerous jurisdictions and the calculation of the group’s tax expense and income tax liabilities involves a degree of estimation and judgement. Tax balances reflect a current understanding and interpretation of existing tax laws. Management periodically evaluates positions taken in tax returns with respect of situations in which applicable tax regulation is subject to interpretation and adjusts income tax liabilities where appropriate. 7.2 Deferred tax
Retirement benefit assets Other temporary differences
Computed tax at Finnish statutory rate of 20% Difference between Finnish and foreign rates
-132 170 -564 -143
The nominals of cross currency swaps are included in both foreign exchange risk and interest rate risk.
Offset against assets
157 -549 -153
9 2 3
Net deferred tax assets (liabilities)
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
Tax loss with no tax benefit
Results of associates
Change in tax legislation
Change in recoverability of deferred tax assets Utilisation of previously unrecognised tax losses
Total income taxes Effective tax rate, %
22.9 % 17.9 %
The group’s income tax expense comprises current tax and deferred tax. Current tax is calculated on the taxable result for the period based on the tax rules prevailing in the countries where the group operates and includes tax adjustments for previous periods and withholding taxes deducted at source on intra-group transactions. Tax expense is recognised in the income statement, unless it relates to items that have been recognised in equity or as part of other comprehensive income. In these instances, the related tax expense is also recognised in equity or other comprehensive income, respectively.