11. Income taxes

Notes to the consolidated financial statements

The following table summarizes the income tax recognized in profit or loss for the years ended 31 December 2019 and 2018.

 

Year ended 31 December

(thousands of €)

2019

2018

Current tax

(1,372)

(584)

Deferred tax

1,158

535

Income taxes

(214)

(50)

Current tax was related to corporate income taxes for subsidiaries operating on a cost plus basis.

Deferred tax income related to subsidiaries working on a cost plus basis and to our fee-for-service business.

Tax liabilities

The below table illustrates the tax liabilities related captions in the consolidated statement of financial position as at 31 December 2019 and 2018.

 

31 December

(thousands of €)

2019

2018

Current tax payable

2,037

1,175

Total tax liabilities

2,037

1,175

On 31 December 2019, the tax liabilities were primarily related to our subsidiaries operating on a cost plus basis.

Taxes recognized in profit or loss

For the purpose of the disclosure below corporation tax was calculated at 29.58% (2018: 29.58%) – which is the tax rate applied in Belgium – on the estimated assessable profit for the year. The applied tax rate for other territorial jurisdictions was the tax rate that is applicable in these respective territorial jurisdictions on the estimated taxable result of the accounting year.

 

Year ended 31 December

(thousands of €)

2019

2018

Profit/loss (-) before tax

150,060

(29,209)

Income tax debit/credit (-), calculated using the Belgian statutory tax rate (29,58%) on the accounting income/loss (-) before tax (theoretical)

44,388

(8,640)

Tax expenses in income statement (effective)

214

50

Difference in tax expenses/income to explain

(44,173)

8,690

 

 

 

Effect of tax rates in other jurisdictions

831

411

Effect of non-taxable revenues

(13,079)

(11,558)

Effect of share-based payment expenses without tax impact

10,318

7,530

Effect of expenses/income (-) not subject to tax

53,270

382

Effect of non-tax-deductible expenses

795

945

Effect of recognition of previously non recognized deferred tax assets

(2,286)

(1,977)

Effect of tax losses (utilized) reversed

(136)

(150)

Effect from under or over provisions in prior periods

30

Effect of non-recognition of deferred tax assets

47,413

13,108

Effect of derecognition of previously recognized deferred tax assets

106

Effect of use of IID

(141,435)

Total explanations

(44,173)

8,690

Non-taxable revenues for the years ended 31 December 2019 and 2018 were related to non-taxable subsidies and tax credits. Expenses/income (-) not subject to tax for the year ended 31 December 2019 mainly consisted of the fair value re-measurement of the derivative financial liabilities related to share subscription agreement and the warrants granted to Gilead (see note 9). The use of the IID for the year ended 31 December 2019 referred to the “innovation income deduction” regime in Belgium. This regime allows net profits attributable to revenue from among others patented products (or products for which the patent application is pending) to be taxed at a lower effective tax rate than other revenues. The effective tax rate can thus be reduced up to 4.4% (3.75% as of 1 January 2020).