It is a priority to clearly explain our tax contribution

Inspections

Periods open to review by the Tax Authorities

• In Spain, at the end of 2020 period the Tax Consolidation Group to which the Endesa Group belongs, is open to inspection on Corporate Income Tax for the periods 2006, 2015 and following years.  Additionally, Endesa and the majority of its controlled subsidiaries have open to review, in general, the periods 2015 and following years for all others taxes applicable.
• In Portugal, France, The Netherlands and Germany, the subsidiaries and branches controlled by the Endesa Group in these countries, in general, have open to inspection the periods 2019 and following years, 2018 and following years and 2017 and following years, respectively.  

Inspections in Progress

• In Spain, at the start of 2021, there are 571 inspection processes open by the Bodies of Inspection of State, Autonomous Community and Local Taxes.

The most relevant process is the one that relates to the Corporate Income Tax General Inspection for the periods 2015-2018 and VAT and Withholdings for the years 2015-2018 which affects the principal entities of the Group and started on 28 June 2019.

• In Portugal a process of Inspection of Endesa Generación Portugal is open regarding VAT and Corporate Income Tax for the period 2018.

Inspections Closed during 2020

• In Spain, during 2020 299 inspection processes have been closed, the majority related to Local Taxes and Taxes related to the Electric Sector, which have resulted in the signing of assessments in disagreement for 0.6M€ and assessments agreed with the Tax Authorities for an amount 3M€.
• In Portugal, during 2020 and at the start of 2021 3 inspections have been closed related to the Branch of Endesa Energía, S.A.U. in Portugal (for Electricity and Hidrocarbon Tax 2016 – 2019 and for Corporate Income Tax 2017 and 2018).

Litigations

The majority of the tax related litigation processes in the Endesa Group arise from processes of recovery of undue tax payments, whereby the Endesa Group pays the applicable taxes correctly and on time, but afterwards requests the refund of the amounts paid.  The request is generally is rejected by the Tax Authorities and the Endesa Group challenges the assessment that rejects the request giving rise the start of a judiciary process.

This generally applies in matters where the Endesa Group considers that the law in question is not in line with the Spanish Constitution o European Law, and in matters where it does not share the interpretative criteria followed by the Tax Authorities.   Following this strategy, the Endesa Group avoids the generation of contingencies in their Accounts, however, without losing the legitimate interest to defend its position in the Courts.

The most relevant processes are the following:

• The taxes regulated in Ley 15/2012 (Tax on the Value of Electric Energy Production, Tax on the storage of used nuclear fuel and radioactive waste in the power plant installations and the Hydraulic charges).  The appeals are pending resolution in diverse judiciary authorities. 
• Certain Autonomous Community taxes with an environmental motive (Taxes on emissions, taxes on waste, hydraulic charges, wind charges, taxes on installations that impact the environment, etc.).  The appeals are pending resolution in diverse judiciary authorities. 
• Certain Excise Taxes that tax the consumption of fuel for electricity production (Mineral Oil Tax and Coal Tax) which a disputable environmental motive. The appeals are pending resolution in diverse judiciary authorities.  
• Corporate Income Tax from the 2006 period due to the taxation in this exercise of income from the refund of a tax declared unconstitutional.  The refund request of undue amounts is based in the application of the Supreme Court doctrine that established the year in which the income should be computed as income for the purposes of Corporate Income Tax. The appeal is pending resolution in the National Court.

It is worth highlighting once again that for these processes, in case of loss, it would not result in a negative effect neither in terms of cash nor in terms of results for the Endesa Group, given that the taxes have been declared and paid.  Exclusively in the case of success, there would be a favourable result, both in terms of cash and in terms of results for the Endesa Group.  

Regarding the remainder of the processes, susceptible to generate a negative effect in the Group, the majority refer to procedures initiated by the Inspection bodies, which have been signed in disagreement by Endesa Group and have not been paid, the payment being suspended during the litigation process.

Before starting any litigation process of this nature, Endesa evaluates the possibility of loss in the highest court.  In those processes where it estimated that there is more probability to lose rather than win, the contingent amount in dispute is provisioned in the accounts; no provision is made in other cases.  The most relevant are highlighted below:

• A litigation regarding the proceedings initiated by the Inspection in 2017 of ENEL Green Power España, S.L.U. (EGPE) is ongoing in relation to Corporation Tax for the years 2010 to 2013.

The main issue under discussion concerns the applicability or otherwise of the tax neutrality regime to the merger of ENEL Green Power España, S.L.U. (EGPE) by absorption of ENEL Unión Fenosa Renovables, S.A. in 2011.

On 10 December 2019, a dismissal Resolution was obtained from the Central Economic Administrative Court on the Corporate Income Tax for 2011 (as regards the position of ENEL Green Power España, S.L.U. (EGPE) as successor to ENEL Unión Fenosa Renovables, S.A.) and it was decided to lodge an appeal with the National Court. Likewise, on 16 June 2020, a partial resolution was received for the Corporate Income Tax for the financial years 2010 to 2013, where the effects of the application of the tax neutrality regime in that period are discussed, which, in the same way, has decided to continue appealing before the National High Court.

The amounts in dispute amount to a total of 99M€, an accounting provision of 3M€ has been made. There is a guarantee covering the suspension of the debt.

• A litigation regarding the proceedings initiated by the Inspection in 2018 of Endesa and its principal subsidiaries in relation to Corporate Income Tax for the years 2011 to 2014.

The principal items in dispute stem mainly from the difference in criterion applied to the Corporate Income Tax deductibility of dismantling expenses, certain financial expenses, certain losses on sales and certain retribution of administrators who simultaneously work as part of the Top Management of the company;   also the criteria of temporary imputation of income from taxes declared unconstitutional.

In 2018, the corresponding appeals where filed with the Central Economic-Administrative Court, which are pending resolution at the current date. 

The amounts in dispute amount to 49M€, an accounting provision of 21M€ has been made. There is a guarantee covering the suspension of the debt.

• Litigation regarding the proceedings initiated by the Inspection in 2018 of Endesa and its principal subsidiaries in relation Valued Added Tax (VAT) of the periods 2012 to 2014. The principal items in dispute stem mainly from the application of the pro rata rule regarding financial income from derivatives.

In 2018, the corresponding appeals where filed with the Central Economic-Administrative Court, which are pending resolution at the current date. 

The amounts in dispute amount to 16M€, an accounting provision of 14M€ has been made. There is a guarantee covering the suspension of the debt

• Litigations regarding the proceedings initiated by various Councils related to the Public Thoroughfare Occupation Tax.

The principal issue stems mainly from requirement by certain Councils of the tax in its general modality (tax on elements) when Endesa considers that this general modality is incompatible with the special modality, for which the Company is already paying (which implies a tax of 1.5% on the invoicing of commercial and distributor entities in the Municipality where they operate).

The litigation processes are numerous and are in various levels of the judicial authorities.

The amounts in dispute amount to 134M€, an accounting provision of 6M€ has been made.