Income tax

Corporate income tax was calculated on the basis of the applicable tax rates, taking account of the tax rules and the valuation of temporary differences.

The effective tax rate for the profit before corporate income tax was 35.7%, compared to 9.6% in 2017. The tax burden in 2018 was €65 million (€5 million in 2017) and can be explained as follows.

	2018		2017*

Profit before tax	181		52

Income tax based on Dutch tax rate (25%)	-45		-13
Effect of tax exemption for participating interests	4		8
Effect of transfer of rolling stock from Ireland to the Netherlands			-85
Effect of deviating tax rates in foreign jurisdictions	4		20
Effect of upward value adjustment to deferred tax assets due to increased future results for tax purposes in the Netherlands			67
Effect of downward value adjustment to deferred taxes due to change in rate	-22		5
Effect of non tax-deductible fine	-4		-10
Effect of adding mixed costs, investment tax allowance etc.	-2		3

Income tax	-65	-35.7%	-5	-9.6%

* The 2017 figures have been adjusted to allow proper comparison

In 2017 the ongoing issue of NS’s lease activities in Ireland was settled. This had a substantial impact on the final income tax for 2017, due to the effect of transferring the rolling stock from Ireland to the Netherlands plus the revaluation of deferred taxes in connection with this transfer. Furthermore, the fine paid to the Netherlands Authority for Consumers and Markets (€41 million) is not tax-deductible for corporate income tax.

The downward value adjustment of deferred taxes in 2018 was made because of the plans to reduce the income tax rate ultimately to 20.5% in 2021. This reduces the value of the potential tax relief for NS, necessitating a downward value adjustment of €22 million to the deferred tax assets. The effect of deviating tax rates in foreign jurisdictions is due to our operations in the United Kingdom and Germany.