Financial performance 2024 consolidated financial statements 05 The Group has operations in various countries that have different tax laws and rates. The weighted average domestic tax rate of Group companies may therefore vary from year to year depending on the relative size of taxable incomes. In 2024, the effective tax rate stood at 22.7% (2023: 20.4%). The increase in the effective rate primarily reflected the change in the Group’s share of the profits and losses of equity-accounted companies from a net profit to a net loss, and the recognition of withholding taxes paid. On December 14, 2022, the European Union adopted a directive implementing the OECD’s Pillar Two reform. France voted for the transposition of this directive into domestic law as part of the Finance Bill for 2024. The Pillar Two rules therefore apply to all entities effectively controlled by Compagnie Générale des Établissements Michelin as of January 1, 2024. The impact of applying Pillar Two amounted to €16 million in 2024. The difference between effective tax rates and theoretical rates (20.9%) is particularly due to unrecognized deferred tax assets, withholding taxes, tax credits and other taxes not based on income. The utilization of deferred tax assets is periodically reviewed at the tax entity level and may lead to the recognition of previously unrecognized deferred tax assets. 11.2 Deferred tax Deferred taxes in the consolidated statement of financial position are as follows: (in € millions) December 31, 2024 December 31, 2023 Deferred tax assets 1,081 932 Deferred tax liabilities (544) (497) NET DEFERRED TAX ASSET 537 435 Deferred tax assets and liabilities at the end of the period, before netting, are as follows: (in € millions) December 31, 2024 December 31, 2023 Employee benefit obligations 438 438 Inventories 137 146 Financial instruments 68 (37) Provisions 84 45 Unused tax losses 304 258 Goodwill and intangible assets (295) (223) Lease liabilities 188 111 Right-of-use assets (172) (110) Property, plant and equipment (439) (400) Other 226 207 NET DEFERRED TAX ASSET 537 435 Deferred tax assets have been recognized for tax loss carryforwards to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilized, taking into account the restrictions applicable in local tax jurisdictions. The probability that unused tax losses will be utilized is assessed according to the entity and its taxable profit projections. These projections are prepared using assumptions that are consistent with the short- and medium-term budgets prepared by Group entities. 398 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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