Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

Taxes on Income

v3.19.1
Taxes on Income
12 Months Ended
Dec. 31, 2018
Major components of tax expense (income) [abstract]  
Taxes on Income
Note 19 - Taxes on Income

A.            Regional Taxation

Israeli taxation
Presented hereunder are the tax rates relevant to the Company in the years 2016-2018:
2016 – 25%, 2017 – 24% and 2018 – 23%.

On January 4, 2016 the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) - 2016, by which, inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.
 
Furthermore, on December 22, 2016 the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps.
 
The first step will be to a rate of 24% as from January 2017 and the second step will be to a rate of 23% as from January 2018.

Luxembourg taxation
Corporate Income Tax rate is 29.22%. Minimum tax payments are made based on the entity’s total assets and are considered as a conditional advance tax payment on corporate income tax due in future tax periods.

Italian taxation
As a rule, corporate income tax (named IRES from 2004) is payable by all resident companies on income from any source, whether earned in Italy or abroad, at the rate of 27.5%. Starting from 2017 the IRES rate is reduced to 24%.

Both resident and non-resident companies are subject to regional income tax (IRAP), but only on income arising in Italy at the rate from 0% (for a short period of couple of years) to 4.82%, depending on the Region.

During 2015 the company applied a tax incentive as per Article 6 paras. 13-19 of Law 23 December 2000, no. 388 (“Tremonti- ambiente”). Such incentive consisted of a reduction of the taxable profit for a fiscal year equal to the amount of investments in tangible fixed assets in the same year, which are necessary to prevent, reduce and repair environmental damages, providing these investments exceed the average environmental investments made in the two previous years. The Company determined the specific amount of environmental investments and filed the required communications with the tax authorities and recorded tax benefit in the amount of approximately €2,900 thousand. During 2017, following a tax inspection and a final settlement reached with the tax authorities, the Company reduced the recorded tax benefit by approximately €500 thousand.

Spanish taxation
As a rule, corporate income tax is payable by all resident companies on income from any source, whether earned in Spain or abroad at the rate of 25%.

The Netherlands taxation
Prior to 1 January 2019, the Dutch corporate income tax rate was 20% on the first EUR 200,000 of taxable profits (lower rate), and 25% on taxable profits exceeding that amount (standard rate). The rates will be gradually reduced - the standard rate will be reduced from 25% to 22.55% in 2020 and to 20.5% in 2021. The lower rate will decrease from 20% to 19% in 2019, to 16.5% in 2020, and to 15% in 2021.

Dutch tax laws provide for an Energy Investment Allowance (“EIA”) – a tax advantage for com-panies in the Netherlands that invest in energy-efficient technology that meet the E-ner-gy List requirements, allowing a deduction of 58% of the investment costs from the corporate income, on top of the usual depreciation. The right to the EIA is declared with the tax return, provided the investment is timely reported to the Netherlands Enterprise Agency.

B.            Composition of income tax benefit (taxes on income):
 
   
For the year ended December 31
 
   
2018
   
2017
   
2016
 
   
€ in thousands
 
Current tax income (expense)
                 
Current year
   
(438
)
   
(494
)
   
(252
)
Previous years
   
26
     
1,044
     
(67
)
     
(412
)
   
550
     
(319
)
Deferred tax income
                       
Creation and reversal of temporary differences
   
197
     
(922
)
   
(250
)
                         
Taxes on income
   
(215
)
   
(372
)
   
(569
)
 
C.            Theoretical tax:

Statutory rate applied to corporations in Israel and the actual tax expense, is as follows:
 
   
2018
   
2017
   
2016
 
   
€ in thousands
 
                   
Profit (loss) before taxes on income
   
819
     
(6,269
)
   
(63
)
Primary tax rate of the Company
   
23
%
   
24
%
   
25
%
Tax benefit (tax on income)
   
(188
)
   
1,505
     
16
 
                         
Profit (loss) subject to different tax rate
   
45
     
(106
)
   
(15
)
Changes in deferred taxes for tax losses and benefits from previous years for which deferred taxes were not created in the past
   
-
     
(448
)
   
-
 
Neutralization of tax calculated in respect of the Company’s share in profits of equity accounted investees
   
585
     
367
     
344
 
Change in temporary differences for which deferred tax were not recognized
   
(576
)
   
(359
)
   
(347
)
Current year tax losses and benefits for which deferred taxes were not created
   
(136
)
   
(1,142
)
   
(378
)
Tax benefit (taxes) in respect to previous years  and others
   
55
     
(189
)
   
(189
)
                         
Actual tax on income
   
(215
)
   
(372
)
   
(569
)
 
D.            Carry forward tax losses:
 
During 2018, following a tax inspection and a final settlement reached with the tax authorities, the Company reduced the carry forward tax losses by approximately €20,000 thousand.
 
As of December 31, 2018, Ellomay Capital Ltd. had available carry forward tax losses, carry forward capital tax losses and deductions aggregating to approximately €20,838 thousand, which have no expiration date.
 
Deferred taxes of the Company have not been recognized as the Company has carry forward tax losses. The Company's management currently believes that as Ellomay Capital Ltd. has a history of losses it is more likely than not that the deferred tax regarding losses carry forward will not be utilized in the foreseeable future.
 
Deferred taxes are recognized by operating subsidiaries for unused tax losses, tax benefits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.

E.          Deferred taxes:
 
 
             
Finance lease
         
Losses
       
 
 
Financial
   
Fixed
   
obligations and
   
Swap
   
on
       
 
 
assets
   
assets
   
long term loans
   
contract
   
income
   
Total
 
 
 
€ in thousands
 
Balance of deferred tax asset
                                   
(liability) as at January 1, 2017
   
(1,279
)
   
(3,061
)
   
2,104
     
178
     
3,662
     
1,604
 
Changes recognized due to business combination
   
(7,678
)
   
-
     
-
     
-
     
2,791
     
(4,887
)
Changes recognized in profit or loss
   
1,565
     
(117
)
   
(84
)
   
(61
)
   
(2,225
)
   
(922
)
Balance of deferred tax asset (liability) as at
                                               
December 31, 2017
   
(7,392
)
   
(3,178
)
   
2,020
     
117
     
4,228
     
(4,205
)
 
                   
Finance lease
           
Losses
         
   
Financial
   
Fixed
   
obligations and
   
Swap
   
on
         
   
assets
   
assets
   
long term loans
   
contract
   
income
   
Total
 
   
€ in thousands
 
Balance of deferred tax asset
                                               
(liability) as at January 1, 2018
   
(7,392
)
   
(3,178
)
   
2,020
     
117
     
4,228
     
(4,205
)
Changes recognized due to business combination
   
-
     
-
     
-
     
-
     
2
     
2
 
Changes recognized in profit or loss
   
200
     
1,262
     
(1,310
)
   
39
     
6
     
197
 
Changes recognized in other comprehensive income
   
257
     
-
             
42
     
(89
)
   
210
 
Balance of deferred tax asset (liability) as at
                                               
December 31, 2018
   
(6,935
)
   
(1,916
)
   
710
     
198
     
4,147
     
(3,796
)