UPM Annual Report 2025

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Governance

Accounts and performance

Financial Statements

Report of the Board of Directors

Sustainability Statement

Auditor's Report

Sustainability Assurance Reports

Timing of nominal amounts of derivatives 2025

7. Income tax

Within 1 year

Between 1–5 years Later than 5 years

Total

€ million

2025

Foreign exchange risk Forward foreign exchange contracts Cash flow hedges

7.1 Tax on profit for the year Income tax

1,347 696 1,147

— — —

1,348 696 1,149

Accounting policies

Net investment hedge Non-qualifying hedges Cross currency swaps Non-qualifying hedges Interest rate risk Interest rate swaps Fair value hedges Cross currency swaps Fair value hedges Interest rate futures Non-qualifying hedges

—

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 recognized in the income statement, unless it relates to items that have been recognized in equity or as part of other comprehensive income. In these instances, the related tax expense is also recognized in equity or other comprehensive income, respectively.

In 2025, tax on profit for the year amounted to €200 million (37 million). The effective tax rate was 28.9% (7.4%). The Group's effective tax rate is affected by the income not subject to tax from subsidiaries operating in tax free zone in Uruguay and by the German tax rate being higher than in Finland. In 2025, the effective tax rate was impacted by the amendment to Germany's corporate income tax legislation, which was enacted in 2025. The change in the applicable tax rate impacted mainly the deferred tax assets and increased tax expenses by €65 million. In 2024, the effective tax rate was significantly impacted by the impairment on assets in biochemicals refinery in Leuna, Germany, and restructuring charges and impairment charges related to the closure of Hürth newsprint mill, the closure of Nordland fine paper machine 3 and the closure of Kaltenkirchen factory in Germany.

—

114

—

114

—

1,068

600

1,668

—

114

—

114

1,319

—

1,319

Commodity risk Electricity sales Cash flow hedges Electricity purchase Cash flow hedges Other commodities Cash flow hedges

Key estimates and judgments

207

—

284

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 judgment. 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. The Group is within the scope of the OECD Pillar Two model rules. Pillar Two legislation was enacted in Finland in 2023, the jurisdiction in which UPM is incorporated, and came into effect from January 1, 2024. The Group applies the IAS 12 exception to recognizing and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes. The entities in scope will be liable to pay a top-up tax for the difference between their GloBE effective tax rate per jurisdiction and the 15% minimum rate. The Group has performed an assessment of its potential exposure to Pillar Two income taxes for year 2025 based on the 2025 financial information for the constituent entities in the Group. The jurisdictions in which the Group operates are expected to be either within the transitional safe harbors or to have jurisdictional GloBE effective tax rates above 15%. The Pillar Two legislation had no impact on income taxes for the current reporting period. The assessment is based on currently available information and analysis regarding the interpretation of the rules, for which additional guidance is still being developed by the OECD. The Group expects that the main jurisdiction for possible exposure to additional Pillar Two income taxes in the future is Uruguay. The financial impact will depend on the results of the Uruguay subsidiaries and the decrease in the substance based income exclusion in accordance with the OECD Pillar Two model rules in subsequent years.

Income tax

—

— —

€ million

2025

2024

Non-qualifying hedges

—

Current tax expense

108

122

Change in deferred taxes

-85

Timing of nominal amounts of derivatives 2024

Within 1 year

Between 1–5 years Later than 5 years

Total

200

€ million

2024

Foreign exchange risk Forward foreign exchange contracts Cash flow hedges

Tax rate reconciliation

1,679

11 —

— — —

1,690

783

€ million

2025

2024

1,099

1,145

Profit before tax

690

500

Computed tax at Finnish statutory rate of 20%

138

100

—

129

—

129

Difference between Finnish and foreign rates

-6

Tax-exempt income

-41

-91

—

1,111

600

1,711

Non-deductible expenses

Withholding taxes

—

129

—

129

Tax loss with no tax benefit

1,134

—

1,134

Results of associates

Commodity risk Electricity sales Cash flow hedges Electricity purchase Cash flow hedges Other commodities Cash flow hedges

Change in tax legislation

—

Change in recoverability of deferred tax assets

-6

—

285

—

354

Utilization of previously unrecognized tax losses

-1

—

Other items

-13

Total income taxes

200

56 26

— —

73 26

Effective tax rate, %

28.9 % 7.4 %

Non-qualifying hedges

—

The nominals of cross currency swaps are included in both foreign exchange risk and interest rate risk.

UPM Financial Report 2025

318

UPM Financial Report 2025

319

318

319

UPM Annual Report 2025

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