18.- TAX NOTE

Tax consolidation scheme

The Group operates in many countries and is therefore subject to the regulations of different tax jurisdictions regarding taxation and corporate income tax.

NH Hotel Group, S.A. and the companies with tax domicile in Spain in which it held a direct or indirect stake of at least 75% during the 2021 tax period are subject to the tax consolidation scheme governed by Title VII, Chapter VI of Law 27/2014 on Corporate Income Tax.

The companies belonging to the tax group have signed an agreement to share the tax burden. Hence, the Parent Company settles any credits and debts which arise with subsidiary companies due to the negative and positive tax bases these contribute to the tax group.

The companies that make up the tax consolidation group are the following:

Corporation tax is calculated on the financial or accounting profit or loss resulting from the application of generally accepted accounted standards in each country, and does not necessarily coincide with the tax result, this being construed as the tax base.

In 2021, Spanish companies pay taxes at the general tax rate of 25% irrespective of whether they apply the consolidated or separate taxation schemes. The foreign companies are subject to the prevailing tax rate in the countries where they are domiciled. In addition, taxes are recognised in some countries at the estimated minimum profit on a complementary basis to Corporation Tax.

The prevailing corporation tax rates applicable to Group companies in the different jurisdictions where the Group has significant operations are as follows:

Financial years subject to tax inspection
In accordance with Spanish tax legislation, the years open for review to the Consolidated Tax Group are

In Germany, an inspection procedure has been opened which is reviewing the amount of negative tax bases still to be offset by the companies. Furthermore, a verification file is open for all the taxes in some of the German companies which covers the 2015 to 2018 financial years.

In Switzerland, during 2021, a Corporation Tax verification file was opened for the 2016 to 2020 financial years.

Finally, an inspection procedure has been opened in Colombia focused on the deductions of certain Corporation Tax expenses.

The Group’s Directors do not expect any significant contingencies to arise from the conclusions of the inspections.

Regarding the financial years open to inspection in the rest of the group, contingent liabilities not susceptible to objective quantification may exist, which are not significant in the opinion of the Group’s Directors. Moreover, the Company considers that there are no significant uncertain tax
positions.

 

Balances with Public Administrations
he composition of the debit balances with Public Administrations at 31 December is as follows:

All these impacts have had an effect on the Consolidated Profit and Loss Statement except for some non-significant impacts that have resulted in changes to the consolidated statement of changes in equity.

The increase in deferred tax assets is mainly due to the generation of assets due to tax losses. Furthermore, in 2020, under the business combinations heading, a balance of 5,303 thousand euros was reported for tax loss assets of the companies within the NH Group as a result of the Boscolo Hotels business combination. In 2021, this balance was reported as a tax credits asset.

At 31 December 2021, the Group had assets resulting from tax losses and deductions amounting to 162,789 thousand euros (132,377 thousand euros in 2020). Out of the total tax credits, 77,170 thousand euros (79,067 thousand euros in 2020) relate to credits activated in Spain.

In the 2021 financial year, the movement of tax credit assets impacting the consolidated comprehensive profit and loss statement was 25,109 thousand euros. The increase in tax credits was due to the activation of the loss for the financial year, mainly in Holland (12,568 thousand euros), Italy (8,134 thousand euros), Portugal (2,358 thousand euros) and Latin America (2,153 thousand euros). To record these credits, the relevant plans for tax credit recovery were prepared to support their activation. Furthermore, in Spain tax credits of 1,897 thousand euros were derecognised.

At 31 December 2021, the Group had tax loss and non-deductible financial expenses carryforwards worth 204,723 thousand euros (168,533 thousand euros at 31 December 2020) and deductions amounting to 2,823 thousand euros (29,136 thousand euros in 2020) that had not been entered in the accompanying consolidated balance sheet because the Directors considered they did not meet accounting standard requirements. These assets are grouped as follows (rate amount):

The amount of credit for finance costs, which are not considered deductible in the Spanish corporate income tax when exceeding 30% of the operating revenue of the tax group calculated in accordance with Article 16 of Law 27/2014 of 27 December, on Corporate Income Tax, amounted
to 58,558 thousand euros at 31 December 2021 (51,334 thousand euros in 2020). There is no deadline for offsetting non-deductible finance costs.

The change to the credits that were not recorded in the 2021 financial year is mainly due to the increase in credits for non-deductible financial expenses in Spain (7,224 thousand euros) and negative tax bases in Germany, Austria, Switzerland, the Czech Republic and Hungary (20,132
thousand euros), Benelux (3,514 thousand euros), Italy (2,239 thousand euros) and Latin America (1,257 thousand euros) which are, in part, offset by the reduction in deductions in Spain (26,313 thousand euros), mainly produced by the expiry of the term for their application.

The composition of the creditor balances with Public Administrations at 31 December is as follows:

The movements in deferred tax liabilities during the year were as follows:

The increase in deferred tax liabilities is mainly due to the update of deferred tax liabilities in Argentina as a result of the tax rate increase (from 25% to 35%) with effect for the 2021 financial year. The total effect for this item was 9.915 thousand euros.

The impacts have had an effect on the Consolidated Profit and Loss Statement except for an amount of 5,354 thousand euros that has resulted in changes to the consolidated statement of changes in equity.

The detail, by country and item, of these deferred taxes is as follows: