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Tax Information Breakdown

It is a priority to clearly explain our tax contribution

To explain the importance of Endesa's tax contribution properly is a priority for the company from the point of view of transparency and corporate social responsibility.

Tax Contribution Report

Adequate explanation of Endesa´s tax contribution is a priority of the company from a transparency and corporate social responsibility perspective.

In line with this, since 2014, Endesa has been publicly providing a breakdown of the principle taxes paid in the countries in which it operates, which reflects the importance given by the Group to tax issues and its level of commitment to the principle stakeholders

Total Tax Contribution 2021: 3,009 M €

Data in million euros

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Medium Target Price € 1,504.5
Open Data Version

Source: PwC

Taxes borne 2021

Taxes borne by Endesa in year 2021, amounted to 1,247 million euros, among wich the planet taxes are the most relevant ones, despite the year´s decreasing trend due to the refund of the Hydraulic charge tax as it was considered non-liable by the Supreme Court, continue to have a relative weight of 36%

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Medium Target Price € 50
Open Data Version

Source: PwC

Tax contribution

Taxes collected 2021

Taxes collected by Endesa in 2021 amounted to 1,762 million euros.

A major part of theses corresponds to taxes on products and services, mainly VAT, wich accounted for 55% of total taxes collected.

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Medium Target Price € 50
Open Data Version

Source: PwC

Tax contribution of Endesa with respect to turnover in 2021
15%
for every 100 euros of net reveneus obtained by the Company, 15 euros are destined to paying taxes. Of this amount, 6 euros correspond to taxes borne and 9 euros to taxes collected.
Total Tax Contribution Rate in 2021
45%
during the financial year 2021, taxes borne represent 45% of the total profit before all taxes borne.
Distributed Tax Value 2021
61%
of the value generated by Endesa has been paid to the Public Treasury in the form of taxes borne and taxes collected. Of every 100 euros of value generated y the group in 2021, 61 euros were destined to the payment of taxes.

Geographic distribution of the tax contribution in 2021

For every 100 euros of taxes paid by Endesa worldwide, almost 90 euros are paid in Spain, a proportion consistent with the volume of business generated in Spain, which reached 90% in 2021.

Source: Total Tax Contribution 2021, prepared by PwC

Geographic distribution of the tax contribution in 2020.
Geographic distribution of the tax contribution in 2020.

Total amount of payments made to Public Administrations

Payments made by Endesa to Public Administration in 2021, including payments in respect of the rates subsidy and energy efficiency charges and other regulatory payments, amounted to a total of 3.122 million euros.

Source: PwC

Total Tax Contribution (TTC)
3.009 M €
Rates subsidy and similar
85 M €
Energy efficiency
28 M €

It is logical that Spain is the jurisdiction where ENDESA has, contributed most in tax payments, representing almost 90% of total taxes paid and collected by Endesa in the 2021 period.  All of the information related to payment and collection of taxes by Endesa is included in the Non-Financial Information and Sustainability Statement, specifically in the section Tax Contribution 4.4. (within the Good Governance section), where the detail is provided per type of tax paid and collected by Endesa in each one of the countries in which it operates.

Endesa's total tax contribution in 2021

Taxes paid in the consolidated tax group
- Amounts paid Spain Amounts collected Spain Amounts paid Portugal Amounts collected Portugal Amounts paid France Amounts collected France Amounts paid Germany Amounts collected Germany Amounts paid Netherlands Amounts
collected Netherlands
Taxes on profits 329 - - - - - - - - -
Corporation Tax (1) 329 - - - - - - - - -
SUBTOTAL TAXES PAID TAX GROUP 329 - - - - - - - - -
Taxes paid to the Treasury
- Amounts paid Spain Amounts collected Spain Amounts paid Portugal Amounts collected Portugal Amounts paid France Amounts collected France Amounts paid Germany Amounts collected Germany Amounts paid Netherlands Amounts
collected Netherlands
Taxes on profits 36 101 10 0 (2) 0 1 0 0 0
Corporation Tax (1) 7 - 10 - (1) - 1 - - -
Tax on Trading Income 28 - - - - - - - - -
Other withholdings and others 1 101 - - (1) - - - - -
- Amounts paid Spain Amounts collected Spain Amounts paid Portugal Amounts collected Portugal Amounts paid France Amounts collected France Amounts paid Germany Amounts collected Germany Amounts paid Netherlands Amounts
collected Netherlands
Property Taxes 96 0 0 0 0 0 0 0 0 0
Real Estate Tax (municipal) 64 - - - - - - - - -
Others (2) 32 - - - - - - - - -
- Amounts paid Spain Amounts collected Spain Amounts paid Portugal Amounts collected Portugal Amounts paid France Amounts collected France Amounts paid Germany Amounts collected Germany Amounts paid Netherlands Amounts
collected Netherlands
Taxes Associated  with Employment 129 229 1 1 2 0 0 0 0 0
Payments made to the Social Security System (3) 129 20 1 - 2 - - - - -
Withholding on earned  income 0 209 - 1 - - - - - -
- Amounts paid Spain Amounts collected Spain Amounts paid Portugal Amounts collected Portugal Amounts paid France Amounts collected France Amounts paid Germany Amounts collected Germany Amounts paid Netherlands Amounts
collected Netherlands
Taxes on products and services 194 745 0 135 0 36 0 37 0 14
VAT paid (4) - 745 - 133 - 36 - 37 - 14
Public Domain  Utilisation Fee 168 - - 2 - - - - - -
Miscellaneous public domain charges and others (5) 26 - - - - - - - - -
- Amounts paid Spain Amounts collected Spain Amounts paid Portugal Amounts collected Portugal Amounts paid France Amounts colected France Amounts paid
Germany
Amounts collected Germany Amounts paid Netherlands Amounts collected Netherlands
Enviromental Taxes 451 373 0 12 0 45 0 22 0 12
Tax on the value of electricity production 205 - - - - - - - - -
Nuclear fuel tax 132 - - - - - - - - -
Hydroelectric fee (271) - - - - - - - - -
Nuclear Services
Fees
216 - - - - - - - - -
Enviromental Taxes (regional) and others 164 - - - 1 - - - - -
Electricity Tax - 335 - 4 - - - 21 - 9
Hydrocarbon Tax - 37 - 8 - 45 - 1 - 3
Coal Tax 5 1 - - - - - - - -
Subtotal Taxes Paid 906 1448 11 148 0 81 1 59 0 26
Total Tax Contribution
Amounts paid     Amounts collected Total
1.247 1.762 3.009

Notas

(1)

Given that the requirements set forth in Chapter VI of Title VII of Law 27/2104 of 27 November on Corporate Income Tax are met, since 2010 ENDESA and certain subsidiaries resident in Spain have been part of the Tax Consolidation Group whose parent company is ENEL S.p.a., the company representing the Tax Group in Spain being ENEL Iberia. It is this company that, as the entity representing the Tax Group, maintains the ultimate relationship with the Public Treasury regarding this Tax.

(2)

The amount related to “Others” within the Property Tax category, refers mainly to the Tax on the Increase in Value of Urban Land, the Tax on Construction, Installations and Works and Fees for licences and authorisations for works.

(3)

The Social Security amounts paid by ENDESA in Spain are included, since, in line with the philosophy implemented by the OECD in analysing a country's tax burden, they are mandatory contributions that generally constitute a significant part of the state’s income and, given that they are imposed rather than voluntary contributions, they are clearly analogous to a tax.

(4)

For VAT settled, VAT paid is reported.

(5)

The item ‘Other public domain charges and others’ includes amounts mainly related to the concession and regulation of dams, public rates and others.

(6)

Where applicable, each tax item includes amounts paid by way of outlay resulting from inspection proceedings and voluntary regularisations, as well as returns received during the year. Delay interest or surcharges are not included, as they are considered not to be part of the tax contribution.

Otros pagos regulatorios
"Social Bonus" (special cheap rate) (Spain) 52
"Social Bonus" (special cheap rate) (Portugal) 14
Energy Efficiency (Spain) 28
Others (France) 5
Others (Portugal) 14
Subtotal other regulatory payments 113

Likewise, ‘Other Regulatory Payments’ are reported separately; these are paid to the Authorities by ENDESA as a statutory requirement, a consequence of the regulation of the sector in which it operates, although these are not strictly taxes and therefore cannot be included in the Total Tax Contribution, specifically:

  • Energy efficiency: gas and electricity supply companies are obliged under the energy efficiency obligation system to make an annual financial contribution to the national energy efficiency fund. This obligation was instituted by Royal Decree 8/2014 of 4 July.
  • Social bonus: obligation of companies owning electricity generation facilities to contribute to the financing of the “social bonus” imposed by Law 24/2013 of 26 December.
  • Other: this corresponds to a payment in France to a Government Association, in relation to the gas tax to fund the sector pensions and the payment used to fund the retirement plans of self-employed workers, such as craftsmen and other workers in industrial and commercial sectors, and the payment in Portugal for the Audiovisual Fees used to fund Rádio e Televisão de Portugal.

The perimeter of companies can be consulted in Appendix I: “ENDESA Companies” of the Consolidated Annual Financial Report.

As a sample of our social commitment and commitment to equality and social cohesion, Endesa allocates 0,7% of the tax liability in the Corporate Income Tax declaration to the Third Sector, contributing to the financing of social projects. 

Main Trends in Total Tax Contribution for 2021 compared with 2020

Data in millions of euros

2020
3.484
million euros
2021
3.009
million euros

Context

Increase in the price of electricity in wholesale markets

Since the first half of 2021 the price of electricity in the Spanish wholesale market has been gradually increasing reflecting unusually high prices which have a certain impact in the formula for fixing the price of the regulated tariff (Voluntary Price for Small Consumer, commonly known as the PVPC).

In order to reduce the impact on the final electricity price, the Spanish Government has introduced distinct regulatory and tax measures which directly affect the final invoice of the Suppliers of Electricity and Gas (Real Decreto-Ley 12/2021, de 24 de junio, Real Decreto-ley 17/2021, de 14 de septiembre y Real Decreto-Ley 29/2021, de 21 de diciembre).

Most relevant measures of a tax nature have been:

  • Reduction in the VAT rate from 21% to 10% for certain electricity supply contract holders, from 26th June 2021 until 30th April 2022.
  • Suspension of the Tax on the value of electricity production on the installations which produce electricity and incorporate it into the electricity system, from 1st July 2021 until 31st March 2022.
  • Reduction of the Electricity Tax rate from 5.11269632% to 0.5%, from 16 September 2022 until 30th April 2022.

At a regulatory level, an extraordinary update of the charges on the electricity system was incorporated until 31st December 2021 which has resulted in a reduction in the charges and regulated tolls in the invoice for electricity consumption. 

 

Electricity Production within the Endesa Group

During 2021 the discontinuance of the production of thermal coal power plants in the Iberian Peninsula was maintained.

 

Endesa´s Tax Contribution

In this context, in the 2021, ENDESA´s total tax contribution reached 3.009M euro, 41% corresponds to taxes borne which represent a cost for ENDESA and 59% refer to taxes collected by ENDESA, in carrying out its economic activity.

Spain has been the jurisdiction where ENDESA has most contributed to the payment of taxes, representing more than 89% of the total taxes paid and collected during 2021.

 

Details of changes 2020-2021

In Spain, taxes borne decreased by 11%, mainly as a consequence of the following variables:

  • Even though there was an increase in taxes on profits as a consequence, principally, of the increase of  Corporate Income Tax motivated by the factors which are included below, the tendency of the rest of taxes was a decrease.
    • In 2020 a reimbursement from the Tax Authorities related to both 2018 and 2019, whilst in 2021 only the reimbursement related to 2020 was taken into account.  
    • The amount of the prepayments for 2021 was superior than the amounts of 2020, due to i) the entry into force of the 5% limitation on the exemption of dividends and capital gains (which results in an effective taxation of 1.25% of these incomes) and ii) the lower tax amortisation of the coal plants, as a consequence of their anticipated closure.
  • Reduction in taxes collected associated with employees, linked to the reduction in workflows versus 2020.
  • Regarding environmental taxes,
    • Highlight the reimbursement of the Hydraulic Canon from the period 2013 – 2020, as a result of the Supreme Court Sentence in which the tax was declared non-existent.
    • Continued reduction of the Coal Tax due to the process of decarbonisation and eventual closure of the plants.
    • Reduction in the Tax on the value of electricity production, as a consequence of the of the suspension adopted within the packet of urgent measures in the area of energy taxation.  In this point, the impact of the suspension is reduced by the impact derived by the increase in the prices of electricity.
    • There is an increase in the category of regional environmental taxes, as a consequence of the application during a full year of the so called Catalan Ecotax, which entered into force in the middle of 2020.

 

The taxes collected in Spain reduced by 17%, principally due to the following aspects:

  • Reduction in employment related taxes collected, in part related to the reduction in workforce compared to 2020.
  • Reduction in VAT paid as a result of the new reduced 10% rate for electricity contracts whose fixed potency term does not exceed 10kW, along with the extraordinary measure to update the charges on the electricity system.
  • Lower Electricity Tax, as a consequence of the implantation of a reduced rate of 0.5%.
  • A increase is noted in the withholding tax on profit taxes, principally as a consequence of a larger payment in 2021 of the supplementary divided (of 1.3136 versus 0.70 in 2020).

With regard to the other countries (Portugal, France, Germany and the Netherlands), there was a 59% decrease in taxes borne, mainly coming from the reclassification inclusion of the Portuguese Audiovisual Tax (CAV) as other payments made to the Public Administrations. On the other hand, taxes collected decreased by 3%, mainly due to the decrease of taxes on products and services collected.

The detail of ENDESA´s tax contribution can be consulted on the corporate website, in which it is possible to download the 2021 Total Tax Contribution Report, elaborated by PWC (Tax Information Breakdown - Endesa).

GLOSSARY

  • TAXES BORNE: represent an actual cost for Endesa and are the taxes that Endesa has paid to the Administrations of different States in which it operates.
  • TAXES COLLECTED: are those that have been paid in because of Endesa's economic activity but which, apart from the related management expenses, imply no cost for the Company.  Taxes withheld on the earned income paid to workers are one example of what we refer to as a tax collected.
  • TAX CONTRIBUTION WITH RESPECT TO TURNOVER: this is an indicator that reflects the extent of the contributions made by the Group in relation to the size of its business.  This indicator is calculated as a relation between the Total Tax Contribution (TTC) and the revenues.
  • TAX VALUE DISTRUBITED TO SOCIETY: this concept refers to the contribution that the Company gives to society in general. According to the TTC methodology, the distributed value of a company is made up of the sum of the following elements: taxes borne and collected (distributed value to Public Administrations), net interests (distributed value to creditors), wages and salaries net of taxes (distributed value to employees), incomes allocated to dividends  (value distributed to shareholders).  This ratio indicates the percentage of the total value generated by ENDESA that is used to pay taxes borne and collected by Public Administrations.  
  • TOTAL TAX CONTRIBUTION RATE: is an indicator of the costs of taxes borne in relation to profits obtained.   It is calculated as the percentage of the taxes borne in relation to the profit before these taxes, taking into account consolidated figures that include the activity carried out by ENDESA at a global level.  
Paid Taxes
Spain Portugal France Germany Netherlands TOTAL
Taxes Borne 1.235 11 0 1 0 1.247
Taxes collected 1.448 148 81 59 26 1.762
TOTAL TAX CONTRIBUTION 2.683 159 81 60 26 3.009
TTC % of total 89,2% 5,3% 2,7% 2% 0,9% 100%
Other regulatory payments
Spain Portugal France Germany Netherlands TOTAL
Social rate 52 14 0 0 0 66
Energy efficiency 28 0 0 0 0 28
Other 0 14 5 0 0 19
Total other Payments to Public Administrations
80 28 5 0 0 113
Total payments made to public administrations
Spain Portugal France Germany Netherlands TOTAL
TOTAL PAYMENTS MADE
2.763 187 86 60 26 3.122

Downloads

Tax Contribution Report 2021

PDF (4.36MB) Download

Financial Tax Information

On the other hand, it is important to highlight that all of the information related to the configuration of Endesa´s Tax Expense is contained in detail in its Consolidated Financial Statements  and in the Standalone Financial Statements and those of each subsidiary, specifically in Note 18denominated Corporate Income Tax.  Therein exists a detailed composition of the tax expense and a conciliation between the accounting result and tax base, between the amount of tax to be paid and the tax expense and between the accounting result and the tax expense.

Additionally, in the Endesa´s Consolidated Financial Statements and in the Standalone Financial Statements and those of each subsidiary, specifically in Note 53, a detailed breakdown is given regarding the principle relevant tax litigations.

 

 Non-Financial Tax Information

Endesa, being a company depending from Enel SpA, entity resident in Italy, is exempt from the obligation to supply to the Tax Authorities the information related to Corporate Income Tax paid in each of the jurisdictions where the company operates. In this case, it is Enel SpA that sends the information of its Group to the Italian Tax Authorities, including the detail of the Endesa Group, and it will be the Italian Tax Authorities that will share this information with the Spanish Tax Authorities.

The Law 11/2018, of 28th December modifies the Commercial Code and the Law of Capital Companies obliging in certain cases the inclusion of specific tax information in the non-financial information section of the financial statements of companies and groups: the earnings obtained country by country, the taxes on earnings paid  and the public grants received. Endesa has decided to go a step further and publish the detail per country in which it operates other information of relevance requested by distinct interest groups. The corresponding information for the Endesa Group has been verified by an independent service provider as follows:

Total amount of Accounting Results Breakdown by countries in which Endesa operates
Pais Spain
Portugal France Alemania Holanda Marruecos Total
Total revenue 18.724 1.289 479 337 70 - 20.899
Accounting  profit before tax (1) 1.981 22 - (19) 2 1 1.924
Corporation  tax paid (2) 336 10 (1) 1 - - 346
Accrued  corporation tax (3) 479 5 - (4) - - 480
Retained earnings 4.272 70 21 2 (2) - 4.363
Cash and cash equivalents 21.754 340 3 - - - 22.097
Number of employees (4) 9.116 74 57 8 3 - 9.258
Public grants received (5) 1,7 - - - - - 1,7
Contributions to foundations and non-profit organisations 7 - - - - 7

Notes

(1)

The criterion for determining the accounting result is on a consolidated basis.

(2)

The data corresponding to the Income Tax corresponds to the Corporate Income Tax paid/collected in the reporting period. In this case, we would point out that ENDESA and its subsidiaries resident in Spain which are 100% owned, are part of the Tax Consolidation Group whose parent company is ENEL S.p.a., the Company representing the Tax Group in Spain being ENEL Iberia, S.L. Therefore, the figure recorded is the amount paid/collected by ENDESA and its subsidiaries included in the Tax Group, to ENEL Iberia, S.L., which, in accordance with the tax regulations declares and settles the tax of the Tax Group with the Tax Administration. On the other hand, for the rest of the subsidiaries of the consolidated commercial group that are not part of the consolidated commercial group, the amount paid / charged to the Tax Administration is taken into account. Morocco consolidates in the group by the equity method, so the accounting result corresponds to the result after taxes in the percentage in which ENDESA participates.

(3)

The data of the Income Tax Accrued corresponds to the Current Corporate Income Tax registered in the period.

(4)

The employee figure refers to the number of active employees at 31 December 2021. Employees in France, Germany, the Netherlands and part of Portugal are employees of branches of the company Endesa Energía S.A. in these countries, which consolidate in Spain.

(5)

The figure for public grants received corresponds to the total amount of public grants received in 2021, all in Spain.

Reconciliation of Corporate Income Tax Effective Rate

The Corporate Income Tax effective rate applicable to Endesa´s 2021 Consolidated Financial Statements is 24,3% versus a nominal rate of 25%.  This is fundamentally due to the deductions and subsidies (-57M€) which principally include the Canary Islands benefits (-40M€), the non tax deductible expenses and provisions (+29M€) and the limitation in the dividend exemption (+18M€).

The detail of the Consolidated Income Statement of the 2021 and 2020 periods is the following: 

Indicador Notes 2020
Current income tax for the year - 480
Deferred income tax for the year 25 (45)
Adjustment of prior years - 9
Income tax provisions - 23
TOTAL - 467
Indicador Notes 2019
Current income tax for the year - 438
Deferred income tax for the year 21 (416)
Adjustment of prior years - 26
Income tax provisions - 2
TOTAL - 50

Reconciliation between accounting result and Corporate Income Tax expense

The 2021 and 2020 reconciliation of the accounting profit (loss) from continuing activities to the income tax expense is as follows:

Indicador Income Statement Rate (%) Income and expenses directly recognised  in equity Rate (%) Total Rate (%)
Profit after tax from continuing operations 1.457 - (1.451) - (6) -
Income tax 467 - (490) - (23) -
Accounting profit/ (loss) before tax 1.924 - (1.941) - (17) -
Theoretical tax 481 25,0 (485) 25,0 (4) 25,0
Permanent differences 26 - (5) - 21 -
- Dividend exemption limitation 18 - - - 18 -
- Impact of net gains/losses under the equity method - - (2) - (2) -
- Non-deducible provisions 3 - - - 3 -
- Consolidation adjustments 5 - (3) - 2 -
Tax credits taken to profit and loss (45) - - - (45) -
Prior year´s  adjustments and other deferred taxes (27) - - - (27) -
Tax impact  in the year 435 - (490) - (55) -
Indicador Income  Statement Rate (%) Income and expenses directly recognised in equity Rate (%) Total Rate (%)
Profit after from  continuing  operations 1.400 - (203) - 1.197 -
Income  tax 388 - (76) - 312 -
Accounting  profit/(loss) before  tax 1.788 - (279) - 1.509 -
Theorical tax 447 25,0 (70) 25,0 377 25,0
Permanent differences 19 - (6) - 13 -
- Impact of net gains/losses under the equity  consolidated method (2) - - - (2) -
- Non-deductible provisions 11 - - - 11 -
- Consolidation adjustments and others 10 - (6) - 4 -
Tax credits taken to profit and loss (65) - - - (65) -
Prior year´s adjustments and other deferred  taxes 36 - - - 36 -
Tax  impact in the year 437 - (76) - 361 -

Data in million €

Reconciliation of net tax

In 2021 and 2020, the reconciliation of the income tax expense to the net tax from continuing activities is as follows:

Indicator
Notes Income Statement
Income and expensesdirectly recognisedin equity
Total
Tax impactin the year
- 435 (490) (55)
Change indeferred tax
25.1 and 25.2 45 490 535
Net tax payableon continuing  operations
- 480 - 480
Indicator
Notes Income Statement
Income and expensesdirectly recognisedin equity
Total
Tax impactin the year
22 22 9 31
Change indeferred tax
21.1 y 21.2 416 -9 407
Net tax payableon continuing operations
438 438 - 438

Data in million €

Details of the income tax expense

The breakdown of the income tax expense for 2021 and 2020 is as follows: 

Indicator Current tax Change in deferred tax (note 25) Total
Recognition in the Income Statement, of wich: 480 (45) 435
Net income of continuing operations 480 - 480
Deferred taxes - (45) (45)
- Depreciation and amortisation of assests - (64) (64)
- Employee benefit provisions - 9 9
- Other provisions - 57 57
- From measurement of derivative financial instruments - (43) (43)
- Loss carryforwards - 3 3
- Unused tax credits - (4) (4)
- Other - (3) (3)
Recognition in equity, of wich: - (490) (490)
Employee benefit provisions - 3 3
From measurement  of derivative financial instruments - (493) (493)
Other - - -
Tax impact in  the year 480 (535) (55)
Indicator
Current tax
Change in deferredtax (note 21)
Total
Recognition inthe Income Statement,of wich:
286 151 437
Net tax payableon continuing operations
286 - 286
Deferred taxes
- 151 151
- Depreciation andamortisation of property,plant and equipment andintangible assests - 129 129
-Provissions forpension funds andworkforce reductionplants - (4) (4)
- Other provisions - 27 27
- Tax loss carryfowards - 8 8
- Unsued tax credits - 7 7
- Accelerated depreciationand amortisation of assestfor tax purposes - (17) (17)
- Other - 1 1
Recognition inequity, of wich:
- (76) (76)
Provisions for pensionfunds and workforcereduction plans
- (16) (16)
Other
- (60) (60)
Tax impact in the year
286 75 361

Data in million €

During the years 2021 and 2020 the deductions and credits allocated to results were the following:

2021 2020
Deductions for Investments in New Fixed Assets in Canary Islands 19 41
Deductions for Donations to Non-Profit Entities 3 11
Tax credit for the production of tangible assets in the Canary Islands 21 10
Tax credit for Income Obtained in Ceuta and Melilla 2 3
Total Deductions and Credits Recognised in Profit and Loss   45 65

Inspections

Periods open to review by the Tax Authorities

  • In Spain, at the end of 2021 period the Tax Consolidation Group to which the Endesa Group belongs (nº 572/10), is open to inspection on Corporate Income Tax for the periods 2006, 2019 and following years.  The Tax Consolidation Group nº 21/05, of which the head is Empresa de Alumbrado Eléctrico de Ceuta, S.A., as well as the rest of the dependent entities of ENDESA, have open to inspection the periods 2017 and following years for Corporate Income Tax.
  • Additionally, Endesa and the majority of its controlled subsidiaries have open to review, in general, the periods 2019 and following years for all other 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, 2021 and following years, 2018 and following years, and 2018 and following years, respectively.  

 

Inspections in Progress

  • In Spain, at the start of 2022, there are 699 inspection processes open by the Bodies of Inspection of State, Autonomous Community and Local Taxes.
  • Outside of Spain, a process of Inspection of Endesa Generación Portugal is open regarding VAT and Corporate Income Tax for the period 2018 and in progress in France, regarding the branch of Endesa Energía, with respect to the Tax on gas transport and distribution for the years 2019 and 2020.

Inspections Closed during 2021

  • In Spain, during 2021 514 inspection processes have been closed.  The most relevant has been that related to the General Tax Inpsection for 2015 – 2018 whereby on 28th May the assessments were signed for Corporate Income Tax, VAT and Withholdings, which have been or will be appealed as detailed in the Litigation section.  Regarding the rest of the processes (Local, Environmental and Excise Taxes), they have been finalised with the signing of assessments in disagreement for an amount of 2M€, principally linked to the Tax on Hydrocarbons, and assessments in agreement for an amount of 1.6M€, linked principally to the Tax on the Value of Electricity Production.  
  • Outside of Spain, during 2021 a General Tax Inspection process was closed in France concerning the branch of Endesa Energia for the periods 2018 – 2020 with an assessment in agreement of 0.2M€ and a process in Portugal for the review of the first half of 2021 of the Hydrocarbon Tax of the branch of Endesa Energía for an immaterial amount. 

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 Electricity Production, Tax on the storage of used nuclear fuel and radioactive waste in the power plant installations and the Hydraulic charges).
    With regard to the Tax on the Value of Electricity Production, the National Court, in an Appeal similar to that of Endesa, handed down a Sentence on 15th July 2021 concluding that specific concepts partially coinciding with those appealed by Endesa should not form part of the taxable base.  Subsequently, in the month of October, the State Attorney appealed the Sentence in cassation.
    The Supreme Court Sentence of 10th June 2021 declared legal the Tax Nuclear Fuel Spent and the inadmissibility of the elevation of the question of unconstitutionality of the same.  This Sentence, along with that of the European Court of Justice from 2019 appear to close the door to a judicial discussion of the legality of the tax.  However, it is pending resulting the judiciary via the form in which the coefficient of retroactivity should be applied as envisaged by the tax legislation.
    Regarding the Hydraulic Canon, as a result of the Supreme Court Sentence in which the tax was declared non-existent, in December 2021 a reimbursement was received corresponding to 100% of the canon paid between 2013 until 2020 by Endesa Generación.
  • 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. On the 20th December 2021 the National Court decided to elevate the prejudicial question to the European Supreme Court in order to analyse the legality of the Coal Tax.
  • Endesa is also disputing in courts the form of calculating the taxable base of the Coal Tax and, in an appeal in which it is not a party, the Supreme Court has admitted this question to cassation.   
  • 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.  Endesa has an unfavourable Sentence from the National Court and has proceeded to present cassation appeals to the Supreme Court.
  • The minimum prepayment for Corporate Income Tax regulated in the Real Decreto Ley 2/2016, along with other tax regulations included in the Real Decreto Ley 3/2016 which may suffer from defects of unconstitutionality.  In 2020, the Constitutional Court declared unconstitutional the Real Decreto Ley 2/2016, which has resulted in the end of the discussion over the periods 2016 and 2017.  In 2022, the Constitutional court has rejected the question of unconstitutionality of the Real Decreto Ley 3/2016. 

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 Corporate Income 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 contingency associated with the process is not determinable a priori, insofar as the impacts associated with the asset revaluations that would occur as a consequence of the acceptance of Management's criteria must be assessed. A guarantee is available to secure 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 derived from the transmission of shareholdings during the inspected period.

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

The amounts in dispute amount to 51M€, an accounting provision of 24M€ 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 were filed with the Central Economic-Administrative Court, which are pending resolution at the current date.  On 28 January 2022, a partial settlement was upheld for Value Added Tax (VAT), which it was decided to continue to appeal against before the Spanish High Court, and the part relating to Corporate Income Tax was pending resolution.

The amounts in dispute amount to 9M€, having been provisioned in the accounts.

  • A litigation regarding the proceedings initiated by the Inspection in 2021 of Endesa and its principal subsidiaries in relation to Corporate Income Tax for the years 2015 to 2018. The definitive assessments have been, or will be, appealed before the Central Economic-Administrative Court.

The items under dispute originate mainly from the differing criteria regarding the deductibility of certain financial expenses during the inspected period and in the rejection of part of the documented deduction for research, development and technology innovation.

The amounts in dispute amount to 47M€, an accounting provision of 28M€ has been made.

  • Litigation regarding the proceedings initiated by the Inspection in 2021 of Endesa and its principal subsidiaries in relation to Value Added Tax (VAT) of the periods 2015 to 2018. The definitive assessment has been received and has been appealed before the Central Economic-Administrative Court.

The principal issues under dispute relate to the application of the pro rata rule regarding certain financial incomes.

The amounts in dispute amount to 2M€, having been provisioned in the accounts.

  • Litigation regarding the proceedings initiated by the Inspection in 2021 of Endesa and its principal subsidiaries in relation to Withholding Tax on account of Personal Income Tax of the periods 2015 to 2018.

 

The definitive assessments have been received and has been appealed before the Central Economic-Administrative Court.

The amounts in dispute amount to 2M€, having been provisioned in the accounts.

  • 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).

Regarding the exigency of the tax in its general modality (tax on elements), in 2021 the Supreme Court admitted to cassation the appeal of a Local Authority given certain favourable Sentences of the High Court of Justice of Andalucía.

In relation to including the income from value added services for the determination of the taxable base, Endesa has been appealing such assessments and in 2021 the Supreme Court has admitted the preparation of the Cassation Appeal deposited.

The amounts in dispute amount to 13M€, an accounting provision of 6M€ has been made.

 

Transactions between Group companies

Related-party transactions carried out by ENDESA Group companies comply with the arm's length principle set out in the OECD Guidelines, the European Union Joint Transfer Pricing Forum and the regulations of the Corporate Income Tax Act.

According to the applicable regulations and recommendations, the pricing method for determining whether a transaction complies with the arm's length principle is that which, based on the facts and circumstances of the transaction, can justify that the transaction has been carried out in accordance with what would have been agreed between independent parties at arm's length.

When it is possible to identify transactions with comparable market characteristics (e.g. indices, public markets, third party contracts), the comparable uncontrolled price method (CUP) is used as it is the most direct and reliable method for applying the arm's length principle. When market comparables are not available, indirect methods such as the cost plus method are applied, which are confirmed by applying the Transactional Net Margin Method (TNMM).

When deemed advisable in view of the circumstances, the ENDESA Group promotes the signing of Advance Pricing Agreements (APA) with the tax authorities to define the methodology to be applied.

ENDESA understands the concept of tax haven in relation to those territories considered as such by Spanish tax regulations, in accordance with Royal Decree 1080/1991 of July 5 which determines the countries or territories referred to by Articles 2, section 3, number 4, of Law 17/1991 of 27 May on Urgent Fiscal Measures, and 62 of Law 31/1990 of 27 December on General State Budgets for 1991. However, the territories included in the EU’s list of noncooperative jurisdictions for tax purposes (both the "black" and "grey" lists) and the jurisdictions analysed by the Global Forum on Transparency and Information Exchange within the OECD are also analysed, as are the lists issued by other organisations and NGOs.

ENDESA's policy is that investments are not made in or through territories classified as tax havens in order to reduce the tax burden. They are only carried out if there are important economic reasons that justify it other than the one mentioned. In addition, ENDESA has never resorted to entities located in tax havens to conceal the identity of parties earning income, conducting activities, owning property or holding rights.

At 31 December 2021, and for a period of over one year, ENDESA does not have holdings in companies located in any territory classified as a tax haven or in any territory classified by third parties as having more favourable taxation than Spain. ENDESA has carried out in the past some non-material activity in other countries which, while not considered tax havens by the Spanish tax authorities, are considered by certain external observers as territories that they believe enjoy more favourable tax regimes than Spain.

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Cooperative relationship with the Tax Administration

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