Our results

Income tax

Accounting policy applied

The income tax of the reporting period includes current and deferred income tax. The current tax burden is calculated on the basis of the tax result for the given reporting period. The tax result differs from the accounting gross profit due to exclusion of revenue which temporarily is not subject to taxation, expenses which temporarily do not represent tax deductible revenue and those expenses and revenue that will not be subject to taxation. Tax burden is calculated based on the tax rates applicable in the given financial year. Deferred income tax resulting from temporary differences between the tax value of assets and liabilities and their carrying amounts is disclosed in the financial statements. However, if a deferred tax liability arises from the initial recognition of goodwill or the initial recognition of an asset or a liability as part of a transaction other than a merger which, at the time of the transaction, does not affect the result or the taxable income (tax loss), it not is recognized.

Deferred income tax is recognized with respect to temporary differences between the carrying amount of an asset or liability and the corresponding tax value. Deferred tax liabilities are recognized with respect to positive temporary differences. Deferred income tax assets are recognized with reference to negative temporary differences up to the amount of the Group’s likely future taxable income sufficient to settle such temporary differences. The value of the deferred tax assets is reviewed at each balance sheet date in terms of prospects of generation of future tax profits required to settle it.

Deferred income tax assets and liabilities are subject to set-off in the case of existence of an enforceable legal title to set off deferred tax assets against deferred tax liabilities, and provided that such deferred tax assets and liabilities pertain to income tax charged by the same tax authorities if it is intended to settle the balances in net amounts.

  

The Tax Group

On 29 September 2016, the companies of the PKP CARGO Group signed an agreement on establishment of a tax group for the period of three fiscal years starting from 1 January 2017. The Tax Group consists of:

  • PKP CARGO S.A.,
  • PKP CARGO SERVICE Sp. z o.o.,
  • PKP CARGOTABOR Sp. z o.o.,
  • PKP CARGOTABOR USŁUGI Sp. z o.o.,
  • PKP CARGO Centrum Logistyczne Małaszewicze Sp. z o.o.,
  • PKP CARGO Centrum Logistyczne Medyka-Żurawica Sp. z o.o.,
  • PKP CARGO CONNECT Sp. z o.o.

PKP CARGO S.A. is the parent of the Tax Group and represents the Tax Group with respect to the obligations provided for in the CIT Act and the Tax Ordinance Act. The Head of the First Tax Office for Mazowsze Region in Warsaw registered the agreement on the establishment of the PKP CARGO Tax Group pursuant to a decision dated 21 November 2016.

In accordance with the CIT Act, the tax groups are treated as separate CIT payers. Thus, the companies of the Tax Group lose their separate identity for the purposes of CIT for the benefit of the Tax Group as a whole. The taxable income of the Tax Group shall consist of the Tax Group total income calculated as surplus of the total amount of income of all companies of the Tax Group over the sum of their losses. The individual identity of the Tax Group pertains solely to corporate income tax, and should not be understood as tantamount to a separate legal identity. Also, it does not affect the payment of any other taxes, in particular each of the companies of the Tax Group remains an independent payer of VAT, civil law transactions tax and personal income tax.

In accordance with the agreements entered into, when a given company of the Tax Group generates taxable profit, it transfers the respective amount of income tax to PKP CARGO S.A. which makes settlements with the Tax Office as the Tax Group representative. On the other hand, if a company of the Tax Group reports tax losses, the resulting tax benefit is attributed to the Tax Group representative, i.e. PKP CARGO S.A. Final settlements between the companies of the Tax Group are carried out after the Tax Group representative has submitted its annual tax return. The final amounts of tax attributed to the specific companies are then determined, account being taken of the pro-rata share in the tax result and use of tax losses generated by other entities of the Tax Group. The companies of the Tax Group must meet a number of requirements such as, inter alia, appropriate value of equity, share of the Tax Group representative in equities of the Tax Group companies, lack of tax arrears, achieving specific level of profitability and execution of transactions with companies out of the Tax Group on an arm’s length basis only. Any breach of the above requirements shall entail dissolution of the tax group and loss of its tax payer status. As at 31 December 2017, the Tax Group satisfied the above requirements. 

SIGNIFICANT VALUES BASED ON PROFESSIONAL JUDGMENT AND ESTIMATES

The Group recognizes deferred tax assets assuming that the future taxable income will enable utilization of such deferred tax assets. A future deterioration of the tax results might lead to this assumption becoming unfounded. The Group Management Board reviews the adopted assumptions regarding probability of recovery of deferred income tax assets based on the changes in the factors taken into consideration at their establishment, new information and historical experience.

  

Income tax recognized in profit / loss

Data in ths. PLN

 Year ended 31/12/2017 (audited)Year ended 31/12/2016 (audited)
Current income tax  
Current tax expense58,1264,489
Adjustments recognized in the current year with reference to past years’ tax133626
Deferred income tax  
Deferred income tax of the reporting period(23,499)(22,267)
Income tax recognized in profit / loss34,760(17,152)
 

According to the legal provisions in effect, no differentiation of rates is expected in the future periods. Frequent differences of opinions as to legal interpretation of the tax regulations, both within the State bodies, and between the State bodies and enterprises, entail lack of certainty and give rise to conflicts. Therefore, the tax risk in Poland is much higher than usually observed in the countries with better developed tax systems. Tax returns may be subject to control for a period of five years, starting from the end of the year of the tax payment. As a result of such controls, the Group’s tax settlements may be increased by additional tax liabilities.

Deferred income tax recognized in other comprehensive income

Data in ths. PLN

   As at 31/12/2017 (audited)As at 31/12/2016 (audited)
Deferred tax on re- measurement of fair value of financial instruments designated as cash flows hedges5,294(745)
Deferred tax on actuarial gains / (losses) on post-employment benefits(6,836)4,081
Foreign exchange differences resulting from translation of deferred tax balance of foreign entities recognized in other comprehensive income (1)(245)4,286
Deferred income tax recognized in other comprehensive income (1,787)7,622

Reconciliation of the effective tax rate

Data in ths. PLN

   Year ended 31/12/2017(audited)Year ended 31/12/2016(audited)
Profit (loss) before tax116,433(150,924)
Income tax expense at 19%22,122(28,675)
Tax effect of revenue which does not constitute revenue within the meaning of tax regulations, including:  
Dividend(49)(82)
Reversal of non-tax provisions and impairment losses(429)(198)
Valuation under the equity method(153)(658)
Valuation of the put option for non-controlling interest(892)(6,934)
Recovered VAT(817)(1,195)
Other(463)(1,432)
Tax effect of non-deductible expenses within the meaning of tax regulations, including:  
PFRON (Disability Fund)4,3434,354
Non-tax provisions and impairment losses1,3571,363
Permanent differences in expenses related with property, plant and equipment3,275679
Representation expenses8241,213
Penalties and compensations974846
Value added tax and other public law liabilities1,8041,332
Other1,3181,627
Effect of unused / (used) tax losses in the period-8,089
Effect of recognition /(reversal) of deferred income tax asset on tax loss1,0741,671
Effect of application of various tax rates339222
Adjustments recognized in the current year with reference to past years’ tax133626
Income tax recognized in profit / loss34,760(17,152)

The corporate income tax rate effective in Poland in the years 2016 - 2017 amounted to 19%. In the case of the AWT Group companies, the relevant tax rates were as follows: 19% in the Czech Republic, 10% in the Hungary, and 25% in the Netherlands.

Deferred tax assets and liability

Data in ths. PLN

 As at 31/12/2017 (audited) As at 31/12/2016 (audited)
Deferred tax assets133,583 107,554
Deferred tax liability(107,418) (106,675)
Total26,165 879
     

Movements in deferred income tax

Data in ths. PLN

Year ended 31/12/2017(audited)As at 1/01/2017 (audited)Recognized in profit /lossRecognized in other comprehensive incomeForeign exchange differences from restatement of deferred income tax balance recognized in other comprehensive incomeAs at 31/12/2017 (audited)
Temporary differences relating to deferred income tax items (liabilities) / assets:
Property, plant and equipment, intangible assets and non-current assets held for sale (including financial lease)(183,033)38,647-302(144,084)
Long-term liabilities(97)97---
Inventories936(2,860)--(1,924)
Receivables - impairment losses7,138662-57,805
Accrued interest related to assets(241)(92)--(333)
Accrued interest related to liabilities182(29)--153
Provisions for employee benefits118,5654226,836(4)125,819
Other provisions3,9042,495-(13)6,386
Accrued expenses6,008(4,857)--1,151
Deferred income(3,080)(271)--(3,351)
Unpaid employee benefits7,375(5,544)--1,831
Foreign exchange differences2,235(1,017)(2,889)-(1,671)
Valuation of derivative instruments218(458)(2,405)(2)(2,647)
Unused tax loss (1)40,769(3,696)-(43)37,030
Total87923,4991,54224526,165

(1) As at 31 December 2017, deferred tax assets on tax losses to be used in future periods represented loss of the Parent Company in the amount of PLN 139,730 thousand and of the subsidiaries in the amount of PLN 55,165 thousand. It will be possible to deduct tax losses in the amount of PLN 167,073 thousand within five tax years following the end of operation of the Tax Group. Other tax losses may be deducted within five tax years following the establishment of the Tax Group. According to the Parent Company Management Board there is no risk as at 31 December 2017 that it will be impossible to realize the above assets.

Data in ths. PLN

Year ended 31/12/2016 (audited)As at 1/01/2016 (audited)Recognized in profit /lossRecognized in other comprehensive incomeForeign exchange differences from restatement of deferred income tax balance recognized in other comprehensive incomeAs at 31/12/2016 (audited)
Temporary differences relating to deferred income tax items (liabilities) / assets:
Property, plant and equipment, intangible assets and non-current assets held for sale (including financial lease)(185,146)6,765-(4,652)(183,033)
Trade payables4,608(4,608)---
Long-term liabilities(543)446--(97)
Inventories466460-10936
Receivables - impairment losses6,856265-177,138
Accrued interest related to assets(157)(84)--(241)
Accrued interest related to liabilities(6)188--182
Provisions for employee benefits133,800(11,250)(4,081)96118,565
Other provisions4,652(852)-1043,904
Accrued expenses7,265(1,257)--6,008
Deferred income(4,731)1,651--(3,080)
Unpaid employee benefits7,188187--7,375
Foreign exchange differences1,582(275)928-2,235
Valuation of derivative instruments450(51)(183)2218
Other858(858)---
Unused tax loss (1)9,09231,540-13740,769
Total(13,766)22,267(3,336)(4,286)879

(1) As at 31 December 2016, deferred tax assets on tax losses to be used in future periods represented loss of the Parent Company in the amount of PLN 149,417 thousand and of the subsidiaries in the amount of PLN 65,157 thousand.

 

Tax losses not recognized in calculation of deferred tax assets

Data in ths. PLN

  As at 31 Dec 2017 (audited) As at 31 Dec 2016 (audited)
As at the balance sheet date, no deferred income tax assets related with the following tax losses were disclosed 113,508 115,682
     

The amount of tax losses not recognized in the calculation of deferred tax assets as at 31 December 2017 represents losses of the companies of the AWT Group in the amount of PLN 104,345 thousand (AWT B.V. in the amount of PLN 59,073 thousand, AWT a.s. (legal successor of AWT Coal Logistics s.r.o.) in the amount of PLN 27,389 thousand, AWT Rail HU Zrt. in the amount of PLN 17,883 thousand) and loss of PKP CARGOTABOR USŁUGI Sp. z o.o. in the amount of PLN 7,558 thousand, and of CARGOSPED Terminal Braniewo Sp. z o.o. in the amount of PLN 1,605 thousand. As at 31 December 2016, the amount of tax losses not recognized in the calculation of deferred tax assets represented losses of the companies of the AWT Group in the amount of PLN 104,774 thousand (AWT B.V. in the amount of PLN 59,333 thousand, AWT Coal Logistics s.r.o. in the amount of PLN 30,930 thousand, AWT Rail HU Zrt. in the amount of PLN 14,511 thousand) and loss of PKP CARGOTABOR USŁUGI Sp. z o.o. in the amount of PLN 7,540 thousand, and CARGOSPED Terminal Braniewo Sp. z o.o. in the amount of PLN 3,368 thousand.

Expiry dates of tax losses to which deferred tax assets were not applied as at 31 December 2017:

Data in ths. PLN

Year2018 2019 2020 2021 2022 2023 and later on Total
Unused tax loss2,229 20,895 19,886 36,741 12,476 21,281 113,508

Expiry dates of tax losses to which deferred tax assets were not applied as at 31 December 2016:

Data in ths. PLN

Year2017 2018 2019 2020 2021 2022 and later on Total
Unused tax loss5,711 6,093 18,352 20,221 40,979 24,326 115,682