14 – Taxes on income and profit

OMV Aktiengesellschaft forms a tax group in accordance with section 9 of the Austrian Corporate Income Tax Act 1988 (KStG), which aggregates the taxable profits and losses of all the Group’s main subsidiaries in Austria and possibly arising losses of one foreign subsidiary (OMV AUSTRALIA PTY LTD).

Dividend income from domestic subsidiaries is in general exempt from taxation in Austria. Dividends from EU and EEA participations as well as from subsidiaries whose residence state has a comprehensive mutual administrative assistance agreement with Austria are exempt from taxation in Austria if certain conditions are met. Dividends from other foreign investments that are comparable to Austrian corporations, for which the Group holds a 10% investment share or more for a minimum period of one year, are also excluded from taxation at the level of the Austrian parent company.

The change in the valuation allowance of deferred taxes for the Austrian tax group was reported in the income statement, except to the extent that the deferred tax assets arose from transactions or events that were recognized outside profit or loss, i.e., in other comprehensive income or directly in equity.

Based on the EU Council Regulation 2022/1854, a solidarity contribution was introduced and was transposed into the local law of the member states. It respresents a contribution for surplus profits of companies operating in the crude petroleum, natural gas, coal, and refinery sectors and was applicable for 2022 and 2023. Certain Group companies in Austria and Germany are subject to the solidarity contribution, which is calculated based on taxable profit. Details with respect to the solidarity contribution in Romania are provided in Note 13 – Solidarity contribution on refined crude oil.

In Austria, the solidarity contribution (Energy Crisis Contribution) is calculated based on the taxable profits of the relevant companies, as determined under national tax rules, that are more than 10% higher (2022: 20% higher) than the average taxable profits generated in the period 2018 to 2021.

OMV Group companies in Germany were not subject to a solidarity contribution in 2023 and 2022, as the taxable profit of the relevant companies did not exceed the average taxable profit generated in the period 2018 to 2021.

In January 2024, despite the EU rules expiring at the end of 2023, the Austrian federal government announced plans to extend the solidarity contribution retroactively into 2024. Moreover, there are intentions to further reduce the threshold for excess profits to 5% in Austria.

The effective tax rate is the ratio of income tax to profit before tax. The tables below reconcile the effective tax rate and the standard Austrian corporate income tax rate of 24% (2022: 25%) showing the major influencing factors.

Differing foreign tax rates effects in 2023 mostly related to subsidiaries operating in tax jurisdictions with high corporate income tax rates (Norway, United Arab Emirates, and Libya). Decrease in the effects related to differing foreign tax rates as compared to 2022 was mostly due to the lower profit before tax of those subsidiaries.

Non-deductible expenses related mostly to the solidarity contribution on refined crude oil in Romania and permanent effects from depreciation, depletion, and amortization. 2022 was predominantly impacted by the losses from fair value changes of financial assets and effects related to the deconsolidation of JSC GAZPROM YRGM Development.

Non-taxable income and tax incentives in 2023 mainly related to the write-up of tangible assets, while in 2022 those effects related mostly to non-taxable gains on the sale of the filling station business in Germany.

Income and expenses related to at-equity accounted investments effects in 2023 were mainly related to the share of profit from equity-accounted investments. 2022 was primarily impacted by the share of profit from equity-accounted investments and the gains from the sucessful listing of Borouge PLC on the ADX (Abu Dhabi Securities Exchange).

Effects related to the change in tax rate in 2022 mainly related to the decrease in the deferred tax rate for Austrian entities. Based on the Eco Social Tax Reform Act, which was adopted by the National Council of Austria in January 2022, the corporate income tax rate was reduced from 25% to 24% in 2023 and further to 23% from 2024 onward.

Tax write-downs and write-ups on investments in subsidiaries in 2022 were mainly related to the tax impairment of the investment in JSC GAZPROM YRGM Development.

The change in valuation allowance for deferred taxes was predominately impacted by the increase in valuation allowances on deferred tax assets in Austria. For further details see Note 27 – Deferred Taxes.

Taxes related to previous years in 2022 were mainly related to the sale of the filling stations business in Germany and effects related to differences between the functional currency and tax currency of certain subsidiaries.

Other effects in 2023 related mostly to the reversal of outside basis differences with respect to Nitro business and tax credits. Those effects were partly offset by the solidarity contribution in Austria for 2023, amounting to EUR 18 mn. 2022 was mainly impacted by the solidarity contribution in Austria (EUR 90 mn).

Global Minimum Tax

Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the Group operates. Under this legislation, Group companies will be subject to Pillar Two income taxes on profits that are taxed at an effective tax rate of less than 15%. The legislation will be effective for the Group’s financial year beginning on January 1, 2024. The Group is in scope of the enacted or substantively enacted legislation and has performed an assessment of the Group’s potential exposure to Pillar Two income taxes.

The assessment of the potential exposure to Pillar Two income taxes is based on the most recent tax filings, country-by-country reporting, and financial statements of the constituent entities as well as on mid-term planning data. Based on the assessment, the Pillar Two effective tax rates in most of the jurisdictions in which the Group operates are above 15% and no material exposure to Pillar Two income taxes is expected.

As disclosed in Note 3 – Accounting policies, judgments and estimates, section 3 – Changes in accounting policies, the Group has applied the mandatory temporary exception with respect to recognition and disclosure of information about deferred taxes related to Pillar Two income taxes.