L'Oréal - 2018 Registration Document

2018 Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Income tax

NOTE 6

ACCOUNTING PRINCIPLES The income tax charge includes the current tax expense payable by each consolidated tax entity and the deferred tax expense. Deferred tax is calculated whenever there are temporary differences between the tax basis of assets and liabilities and their basis for consolidated accounting purposes, using the balance sheet liability method. The restatement of assets and liabilities linked to capital lease contracts results in the booking of deferred tax. Deferred tax includes irrecoverable taxation on estimated or confirmed dividends.

Deferred tax is measured using the tax rate enacted at the closing date and which will also apply when the temporary differences reverse. Deferred tax assets generated by tax loss carryforwards are only recognised to the extent it is probable that the entities will be able to generate taxable profit against which they can be utilised. Under the French system of tax consolidation, the taxable profits of some French companies are offset when determining the overall tax charge, which is payable only by L’Oréal, the parent company of the tax Group. Tax consolidation systems also exist outside France.

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Detailed breakdown of income tax 6.1.

2018

2017

2016

€ millions

Current tax Deferred tax INCOME TAX

1,241.3

1,096.1 -194.8

1,127.2

43.0

86.5

1,284.3

901.3

1,213.7

Analysis of tax charge 6.2. The income tax charge may be analysed as follows:

2018

2017

2016

€ millions

Profit from continuing operations before tax and associates

5,183.7 26.25% 1,360.6

4,727.0 28.95% 1,368.3

4,297.1 28.91% 1,242.5

Theoretical tax rate Expected tax charge

Impact of permanent differences (1) Impact of tax rate differences (2) Change in unrecognised deferred taxes

28.8

0.5

131.7 -164.6

-148.3

-305.9

-3.2 46.4

-21.2

9.3

Other (3)

-140.4 901.3

-5.2

GROUP TAX CHARGE

1,284.3

1,213.7

In 2016, this amount included €130.5 million relating to impairment losses recognised against Clarisonic and Magic (note 4). (1) Including in 2017, profits of €147 million relative to the impact on deferred tax balances of the decrease in the tax rate from 38.25% to 24.95% in the USA, and €35 million (2) and €45 million respectively in 2017 and 2016 relative to the impact on deferred tax balances of the decrease in the tax rate from 34.43% to 25.83% planned in France by 2022. Including tax credits, taxes on dividend distributions, tax reassessments and provisions for tax liabilities. (3) including, in 2017, €211 million related to the 3% tax on dividends paid, following the claim filed for the 2013 to 2017 financial years, net of charges paid in June 2017 in s respect of 2017 in the amount of €55.7 million. This account also includes a charge of €62 million relating to an exceptional and additional contribution of 30% in France; including, in 2016, a charge of €52 million relating to the 3% tax on dividends paid as well as income of €57 million relating to claims filed in order to recover the share of s costs and expenses levied on certain dividends paid to consolidated companies by companies based in the European Union. percentage of pre-tax profit. The impact of any reduced tax each country, multiplied by the normal taxation rate. The rates existing in certain countries in addition to the normal tax theoretical tax rate reflects the total expected tax charge as a rates is included on the line Impact of tax rate differences. The expected tax charge reflects the sum of pre-tax profit for

REGISTRATION DOCUMENT / L'ORÉAL 2018

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