Hermès // 2021 Universal Registration Document

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CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

INCOME TAX

NOTE 6

Accounting principles Income tax The income tax expense includes the current tax due for the financial year by fully consolidated companies and deferred taxes. The Group’s companies are regularly audited by the tax authorities of the countries in which they operate. Appropriate liabilities are recorded in respect of any uncertain tax positions, the amounts of which are reviewed in accordance with the criteria of IAS 12 and IFRIC 23. Tax consolidation regimes The French tax consolidation regime allows certain French companies in the Group to offset their taxable income for the purpose of determining the overall income tax expense, for which only the parent company, Hermès International, remains liable.

Furthermore, there is another tax consolidation regime outside France.

Deferred taxes Deferred taxes are calculated on all timing differences existing at financial year-end at the tax rate in force on that date, or at the enacted tax rate (or nearly enacted rate) for the subsequent financial year. Previous deferred taxes are revalued using the same method (liability method). The restatement of assets and liabilities related to leases also gives rise to the recognition of deferred taxes. Deferred tax assets are recorded to the extent that their future use is probable given the expected taxable profits. If a non-recovery risk arises on some or all of a deferred tax asset, an impairment is recorded.

Breakdown of income tax 6.1

2021

2020

In millions of euros

Current tax

(1,029)

(618)

Deferred taxes

14

5

TOTAL

(1,015)

(613)

Rationalisation of the income tax expense 6.2 The effective tax rate was 29.5% as at 31 December 2021, compared with 30.9% as at 31 December 2020. The difference between the theoretical income tax expense and the net actual income tax expense is explained as follows:

2021

2020

In millions of euros

Net income attributable to owners of the parent

2,445

1,385

Net income from associates

34 (8)

16 (4)

Net income attributable to non-controlling interests

Income tax expense Net income before tax

(1,015) 3,435 29.5% 28.4% (976)

(613) 1,986 30.9% 32.0% (636)

Effective tax rate

Current tax rate in France

Theoretical income tax expense

Reconciliation items: differences relating to foreign taxation (primarily the tax rate) s

36

56

permanent differences and other s

(75)

(33)

TOTAL

(1,015)

(613)

The tax rate applicable in France in 2021 is the basic rate of 27.50% increased by the social contribution of 3.3%, i.e. a total of 28.41%. “Permanent differences and other” include income and expenses that will never be deductible or taxable, the impact of tax loss carryforwards that have not been activated, tax adjustments for prior years and any risks and uncertain tax positions.

378 2021 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL