Corporate (income) tax was calculated on the basis of the applicable tax rates, taking account of the tax rules and the valuation of temporary differences.
The effective tax rate for the profit before corporate (income) tax was 8.9%, compared with 35.7% in 2018. The tax burden in2019 amounted to €21 million (2018: €65 million) and can be explained as follows.
(in millions of euros) | 2019 | 2018 | ||
Profit before tax | 236 | 181 | ||
Income tax based on Dutch tax rate (25%) | -59 | -45 | ||
Settlement of 2018 tax return | -1 | |||
Effect of participating exemption | 5 | 4 | ||
Effect of deviating tax rates in foreign jurisdictions | 10 | 4 | ||
Effect of upward value adjustment to deferred tax assets due to increased future results for tax purposes in the Netherlands | -3 | - | ||
Effect of downward value adjustment to deferred taxes due to change in rate | 7 | -22 | ||
Effect of non-tax-deductible penalties, etc. | 15 | -4 | ||
Effect of adding mixed costs, investment credit, etc. | 5 | -2 | ||
Income tax | -21 | 8.9% | -65 | 35.7% |
In 2019, the fine imposed by the ACM and paid in 2017 was refunded to NS; this refund is exempt from corporate (income) tax. The same applies to the remarketing fee that NS received for the sale of Fyra train sets. The downward value adjustment of deferred taxes in 2018 was made because of the government's plans to reduce the corporate (income) tax rate ultimately to 20.5% in 2021. This reduces the value of the potential tax relief for NS, necessitating a downward value adjustment of €22 million to the deferred tax assets. In 2019, the government reviewed its tax plan and changed the corporate (income) tax rate to 21.7% in 2021. As a result, the deferred tax assets increased by €7 million. The effect of deviating tax rates in foreign jurisdictions is due to our operations in the United Kingdom and Germany.
Net profit
The net profit for 2019 was €215 million, which is €99 million higher than in 2018. This increase is attributable to the higher operating result and the lower effective tax rate. Abellio's share in the net profit decreased to a profit on its foreign operations of €4 million (2018: €21 million).