Tax items recognized in comprehensive income and directly in equity

Tax items recognized in comprehensive income and directly in equity were distributed as follows.

SEK in millions

Jan–Dec 2016

Jan–Dec 2015

Tax items recognized in net income

   

Current tax

-2,160

-1,391

Adjustment of current tax related to prior years

6

-17

Deferred tax

-577

-666

Adjustment of deferred tax related to prior years

-68

-55

Effect on deferred tax from changes in tax rates

-17

-28

Total tax expense recognized in net income

-2,816

-2,157

Tax items recognized in other comprehensive income

   

Current tax

640

-538

Deferred tax

304

-1,051

Total tax recognized in other comprehensive income

944

-1,589

Tax items recognized directly in equity

   

Deferred tax related to treasury share repurchase made by associated company

-4

Total tax recognized directly in equity

-4

Income before taxes was SEK 19,249 million in 2016 and SEK 11,689 million in 2015. The difference between the nominal Swedish income tax rate and the effective tax rate comprises the following components.

Percent

Jan–Dec 2016

Jan–Dec 2015

Swedish income tax rate

22.0

22.0

Effect of higher or lower tax rates in subsidiaries

-0.4

-0.2

Withholding tax on earnings in subsidiaries and associated companies1

1.1

-1.7

Prior year adjustment of current tax expense

0.0

0.1

Prior year adjustment of deferred taxes

0.4

0.5

Effect on deferred tax expense from changes in tax rates

0.1

0.2

Income from associated companies

-3.2

-6.5

Current year losses for which no deferred tax asset was recognized

0.4

0.1

Non-deductible expenses2

0.5

5.7

Tax-exempt income3

-6.3

-1.7

Effective tax rate in net income

14.6

18.5

Effective tax rate excluding effects from associated companies

17.6

26.8

1) Withholding tax on earnings in subsidiaries and associated companies is impacted by an intragroup restructuring in Q1 2015. The intragroup restructuring resulted in a revaluation and one-off effect of the withholding tax provision and a decrease of the deferred tax liability.
2) Non-deductible expenses are impacted by non-tax deductible goodwill impairment in Denmark in 2015.
3) Tax-exempt income is influenced by non taxable capital gain related to the divestment of Xfera Mòviles S.A., (Yoigo) in 2016.

Deferred tax assets and liabilities

Movement in deferred tax assets and liabilities were as follows.

SEK in millions

Dec 31, 2016

Dec 31, 2015

Deferred tax assets

   

Opening balance

5,054

5,955

Change recognized in comprehensive income

-359

-1,346

Operations acquired

1,054

Operations divested

-510

Reversals of offset tax liabilities/assets, other reclassifications

-50

-256

Change in tax rate1

-17

-72

Exchange rate differences

266

-173

Reclassification to assets classified as held for sale

-18

-108

Deferred tax assets, closing balance

4,366

5,054

Deferred tax liabilities

   

Opening balance

10,627

10,840

Change recognized in comprehensive income

-19

895

Change of withholding taxes recognized directly in equity

4

Operations acquired

743

Operations divested

-33

Reversals of offset tax assets/liabilities, other reclassifications

-32

-158

Change in tax rate1

0

-45

Exchange rate differences

20

-403

Reclassification to liabilities directly associated with assets classified as held for sale

0

-1,245

Deferred tax liabilities, closing balance

10,567

10,627

1) The effect of change in tax rate relates to the reduction of the Norwegian corporate income tax rate effective from January 1, 2017. The change triggered a recalculation of existing deferred tax assets and liabilities in Telia Company’s Norwegian operations, resulting in a net deferred tax expense of SEK 17 million in 2016.

Deferred tax asset and liabilities are allocated to the following temporary differences and tax loss carry-forwards.

SEK in millions

Dec 31, 2016

Dec 31, 2015

Gross deferred tax assets

   

Non-current assets

3,408

3,283

Provisions

1,034

1,033

Accounts receivables and other current assets

13

115

Interest expense carry-forwards

199

92

Tax loss carry-forwards, continuing operations

1,843

4,308

Tax loss carry-forwards reclassification to assets classified as held for sale

440

Subtotal

6,497

9,271

Valuation allowances

   

Non-current assets

-4

-4

Accounts receivables and other current assets

-3

-17

Tax loss carry-forwards, continuing operations

-1,569

-3,192

Tax loss carry-forwards reclassification to assets classified as held for sale

-407

Subtotal

-1,576

-3,620

Offset deferred tax liabilities/assets

-537

-489

Reclassification to assets classified as held for sale

-18

-108

Total deferred tax assets

4,366

5,054

Deferred tax liabilities

   

Withholding taxes subsidiaries and associated companies

1,210

1,561

Non-current assets

6,619

6,637

Provisions

1,062

1,354

Accounts receivables and other current assets

272

13

Profit equalization reserves

1,941

2,796

Subtotal

11,104

12,361

Offset deferred tax assets/liabilities

-537

-489

Reclassification to liabilities associated with assets classified as held for sale

-1,245

Total deferred tax liabilities

10,567

10,627

Net deferred tax assets (+)/liabilities (-)

-6,201

-5,573

Net increase (+)/decrease (-) in valuation allowance

-2,044

79

Unrecognized deferred tax

Unrecognized deferred tax assets, as reflected by the valuation allowance at December 31, 2016, were expected to expire as follows.

Expected expiry, SEK in millions

2017

2018

2019

2020

2021

2022-2025

Unlimited

Total

Unrecognized deferred tax assets

0

0

0

0

0

811

758

1,569

As of December 31, 2016 and 2015, unrecognized deferred tax liabilities for undistributed earnings in subsidiaries, including estimated such income tax that is levied on dividends paid, totaled SEK 52 million and SEK 122 million respectively.

Tax loss carry-forwards

Deferred tax assets originating from tax loss carry-forwards mainly related to international carrier operations. Tax losses in the international carrier operations refer mainly to impairment losses on plant and machinery incurred in 2002. Telia Company’s accumulated tax loss carry-forwards were SEK 6,711 million in 2016 and SEK 16,662 million in 2015. The decrease is mainly related to the divestment of Xfera Mòviles S.A., (Yoigo).

Tax loss carry-forwards as of December 31, 2016 are expected to expire as follows.

Expected expiry, SEK in millions

2017

2018

2019

2020

2021

2022-2036

Unlimited

Total

Tax loss carry-forwards

0

0

0

0

2

3,734

2,975

6,711