05 Financial performance 2024 consolidated financial statements Note 11 TAXES ACCOUNTING POLICIES Current and deferred taxes, plus any withholding tax on royalties and on distributions of retained earnings within the Group, are recorded in the consolidated income statement except if they relate to items recognized either in other comprehensive income or directly in equity, in which case they are also recognized, respectively, in other comprehensive income or directly in equity. Current tax is based on the results of Group companies and is calculated according to local rules, including any adjustments to tax payable in respect of previous years. Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the consolidated financial statements, using enacted or substantially enacted tax rates that are expected to prevail when the temporary differences reverse. A deferred tax asset or liability is recognized on initial recognition of transactions arising from business combinations and impacting the accounting or taxable profit or loss. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the tax loss carryforwards and the temporary differences can be offset. Deferred tax is calculated on temporary differences arising from investments in subsidiaries, joint ventures, and associates: deferred tax assets are recognized if the reversal is under the entity's control and is also probable. Deferred tax liabilities are recognized unless their reversal is controlled and not probable. Tax positions are analyzed periodically and, if any positions are considered unlikely to be accepted by the tax authorities, a provision is booked for the most probable amount in order to cover the risk. Assets/liabilities resulting from uncertain tax treatments are included in current or deferred tax assets or liabilities in the consolidated statement of financial position. 11.1 Income tax expense (in € millions) 2024 2023 Current tax expense (753) (849) Deferred tax benefit/(expense) 198 342 INCOME TAX (555) (507) Current tax includes €55 million of withholding tax on royalties and retained earnings distributed between Group companies (2023: €33 million). The Group's tax proof is presented in the table below: (in € millions) 2024 2023 Income before taxes 2,445 2,490 Tax calculated using domestic tax rates applicable to income in the respective countries (510) (472) Tax effect of: n untaxed transactions (67) (13) n deferred tax assets not recognized during the year (20) (41) n net change in unrecognized deferred tax assets 36 11 n changes in tax rates 23 - n taxes with no tax base (tax credits, withholding tax, etc.) (34) (2) n Other items 19 10 INCOME TAX (555) (507) Effective tax rate 22.7% 20.4% 397 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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