2021 UNIVERSAL REGISTRATION DOCUMENT

5. 2021 Consolidated financial statements

NOTE 6. Income tax

Accounting principles

The income tax charge includes the current tax expense payable by each consolidated tax entity and the deferred tax expense. Deferred tax is calculated whenever there are temporary differences between the tax basis of assets and liabilities and their basis for consolidated accounting purposes, using the balance sheet liability method.

The restatement of assets and liabilities relating to lease contracts results in the booking of deferred tax.

Deferred tax includes irrecoverable taxation on estimated or confirmed dividends.

Deferred tax is measured using the tax rate enacted at the closing date and which will also apply when the temporary differences reverse.

Deferred tax assets generated by tax loss carry forwards are only recognized to the extent it is probable that the entities will be able to generate taxable profit against which they can be utilized.

Under the French system of tax consolidation, the taxable profits of some French companies are offset when determining the overall tax charge, which is payable only by L’Oréal, the parent company of the tax Group. Tax consolidation systems also exist outside France.

Uncertain tax positions are recorded in the balance sheet under Non-current tax liabilities. These correspond to an estimate of tax risks and litigation related to income tax for the various countries in which the Group operates.

6.1. Detailed breakdown of income tax
€ millions 2021 2020 2019
Current tax

Current tax

2021

1,361.7

Current tax

2020

1,219.9

Current tax

2019

1,699.7

Deferred tax

Deferred tax

2021

83.6

Deferred tax

2020

-10.1

Deferred tax

2019

- 42.5

INCOME TAX

INCOME TAX

20211,445.4

INCOME TAX

20201,209.8

INCOME TAX

20191,657.2
6.2. Analysis of tax charge

The income tax charge may be analyzed as follows:

€ millions 2021 2020 2019
Profit from continuing operations before tax and associates Profit from continuing operations before tax and associates20216,046.9 Profit from continuing operations before tax and associates20204,776.5 Profit from continuing operations before tax and associates20195,411.4
Theoretical tax rate

Theoretical tax rate

2021

24.72%

Theoretical tax rate

2020

26.37%

Theoretical tax rate

2019

26.21%

Expected tax charge Expected tax charge20211,494.8 Expected tax charge20201,259.7 Expected tax charge20191,418.1
Impact of permanent differences

Impact of permanent differences

2021

17.3

Impact of permanent differences

2020

31.4

Impact of permanent differences

2019

64.4

Impact of tax rate differences

Impact of tax rate differences

2021

-74.3

Impact of tax rate differences

2020

- 129.9

Impact of tax rate differences

2019

- 161.6

Change in unrecognized deferred taxes

Change in unrecognized deferred taxes

2021

3.5

Change in unrecognized deferred taxes

2020

1.7

Change in unrecognized deferred taxes

2019

2.3

Effect of non-current tax liabilities (1)

Effect of non-current tax liabilities

(1)
2021

- 11.9

Effect of non-current tax liabilities

(1)
2020

108.2

Effect of non-current tax liabilities

(1)
2019

346.7

Other(2)

Other

(2)
2021

16.0

Other

(2)
2020

-61.3

Other

(2)
2019

- 12.7

GROUP  TAX CHARGE

GROUP  TAX CHARGE

20211,445.4

GROUP  TAX CHARGE

20201,209.8

GROUP  TAX CHARGE

20191,657.2

(1) Including, in 2019, a €262 million expense to cover an agreement made with the French tax administration regarding a disagreement over which French products in our business fall under the tax base for 2014-2018.

(2) Including tax credits and taxes on dividend distributions.

The expected tax charge reflects the sum of pre-tax profit for each country, multiplied by the normal taxation rate. The theoretical tax rate reflects the total expected tax charge as a percentage of pre-tax profit.

The impact of any reduced tax rates existing in certain countries in addition to the normal tax rates is included on the line Impact of tax rate differences.