4.9 Taxes

The company will pay its income taxes in accordance with the underlying tax rate, without special tax arrangements. Income taxes consist of direct taxes and the change in deferred tax: EUR -34.5 (-48.5) million and EUR 13.8 (2.7) million respectively. Fingrid’s effective tax rate is essentially comparable to Finland’s corporate tax rate 20%. The only difference between the Finnish corporate tax rate and Fingrid’s effective tax rate is due to a minor amount of non-deductible items, amounting in 2019 to EUR -0.1 (0.0) million. The table below illustrates the development of Fingrid’s effective tax rate.

Verot vuosina
10. DEFERRED TAX ASSETS AND LIABILITIES, € 1,000  
Changes in deferred taxes in 2019:
Deferred tax assets 31 Dec 2018 Recorded in 
income 
statement at 
profit or loss
31 Dec 2019
Provisions 285 -6 279
Trade payables and other liabilities 1,913 146 2,059
Derivative instruments 2,281 -762 1, 519
Congestion income 10,788 -1,786 9,003
Connection fees (IFRS 15) 8,028 1,965 9,993
Lease liabilites (IFRS 16)   62 62
Total 23,296 -381 22,915
       
Deferred tax liabilitie      
Accumulated depreciations difference -79,779 10,000 -69,779
Property, plant and equipment, tangible and intangible asset -29,407 -799 -30,206
Other receivables -556 -530 -1,086
Other financial assets -71 -140 -210
Borrowings -1,501 -243 -1,744
Derivative instruments -11,673 5,914 -5,758
Total -122,986 14,202 -108,784
       
Changes in deferred taxes in 2018:
Deferred tax assets 31 Dec 2017 Recorded in 
income 
statement at 
profit or loss
31 Dec 2018
Provisions 295 -10 285
Current financial receivables 3 -3  
Trade payables and other liabilities 1,566 347 1,913
Derivative instruments 3,207 -926 2,281
Congestion income 8,846 1,942  10,788
Connection fees (IFRS 15)   8,028 8,028
Total 13,918 9,378 23,296
       
Deferred tax liabilities
Accumulated depreciations difference -89,779 10,000 -79,779
Property, plant and equipment, tangible and intangible assets -28,665 -742 -29,407
Other receivables -560 4 -556
Other financial assets -99 29 -71
Borrowings -2,619 1,118 -1,501
Derivative instruments -5,281 -6,392 -11,673
Total -127,003 4,017 -122,986

 Accounting principles

Income taxes

Taxes presented in the consolidated income statement include the Group companies’ accrual taxes for the profit of the financial year, tax adjustments from previous financial years and changes in deferred taxes. Deferred taxes are recorded in accordance with Finland’s statutory corporate tax rate of 20%. Taxes are recognised in the income statement unless they are linked with other comprehensive income, in which case the tax is also recognised in other comprehensive income. Such items in the Group consist solely of available-for-sale investments, since hedge accounting for electricity derivatives was discontinued in 2014.

Deferred tax assets and liabilities are recognised on all temporary differences between the tax values of asset and liability items and their carrying amounts using the liability method. Deferred tax is recognised using tax rates valid up until the closing date. The deferred tax liabilities arising from the original recognition of goodwill will not be recognised, however. Deferred tax liabilities will also not be recognised if they are caused by the original recognition of the asset or liability and the item is not related to a merger and the transaction will not affect the accounting totals or the taxable revenue during its implementation. The deferred tax assets are shown as non-current receivables and deferred tax liabilities correspondingly as non-current liabilities.

The largest temporary differences result from the depreciation of property, plant and equipment, from financial instruments, and from the use of congestion income for capital expenditures. No deferred tax is recognised on the undistributed profits of the foreign associated company, because receiving the dividend does not cause a tax impact by virtue of a Nordic tax agreement. The deferred tax asset from temporary differences is recognised up to an amount which can likely be utilised against future taxable income.