SOMFY_ANNUAL_FINANCIAL_REPORT_2017

07 CONSOLIDATED FINANCIAL STATEMENTS

CURRENT AND DEFERRED TAX NOTE 11 — CURRENT TAX

CVAE The CVAE tax charge is classified as income tax charge in order to provide a more relevant information with respect to comparison, given prevailing market practice. TAX ON DIVIDENDS This tax, which took the form of an additional income tax contribution of 3% based on distributed dividends (including interim dividends) was removed by the French Constitutional Council on 6 October 2017. This tax, which was based on gross dividends as voted by the General Meeting and was payable by the distributing company, was designed as an additional income tax contribution and fell within the scope of IAS 12. Therefore, it was recognised as an income tax charge within the income statement only once the dividends had been approved by the competent corporate body. INVESTMENT TAX CREDIT The treatment of investment tax credits is not specifically addressed under IFRS. A number of criteria need to be assessed on a case-by-case basis to ascertain whether to recognise the investment tax credit as income tax (IAS 12) or as a grant (IAS 20). These criteria include the non-refundable nature or not of the tax credit should taxable profits be sufficient, the specific nature or not of the investment, the taxable nature or not of the tax credit and the number of requirements for eligibility for the tax credit. The CICE tax credit is recognised as an IAS 20 operating grant as a deduction to employee expenses. The CIR tax credit is recognised as an IAS 20 investment grant in other operating income. The analysis of the accounting treatment of SOPEM’s investment tax credit, carried out in accordance with the criteria set out above, led the Group to conclude that it falls within the scope of IAS 12. This tax credit was therefore recognised as a tax income. In order to avail of this tax credit, SOPEM has to comply with a number of commitments, such as a minimum investment value, a minimum number of people employed at the site and a deadline for completion of the investment (30 June 2020).

The tax consolidation agreement signed between Somfy SA and its direct and indirect subsidiaries was renewed on 1 January 2013 for an indefinite period of time. The following companies are party to this agreement at 31 December 2017: Somfy SA, Somfy Activités SA, Simu SAS, CMC SARL, SEM-T SASU, Domis SA, BFT Sud Est SAS, Opendoors SAS, Automatismes BFT France SAS, Overkiz SAS and Somfy Protect by Myfox SAS. Under this agreement, the difference between the sum of income taxes calculated for each company and the total of the tax integrated group is accounted for as income in the income statement of the Group’s holding company. Should a subsidiary cease to be a member of the tax consolidation, it will be compensated by Somfy SA in accordance with a jointly-agreed exit methodology, taking account of the situation at that date. DEFERRED TAX Deferred tax assets and liabilities are measured at the income tax rate expected to apply to the financial year when the asset will be realised or the liability settled, on the basis of income tax rates (and tax regulations) adopted or virtually adopted at year end. Deferred tax is recognised for the temporary differences between the book value of assets and liabilities and its tax value and restatements made on consolidation to conform to Group accounting standards (extended concept of deferred tax calculation). Deferred tax relating to tax losses of companies not included in the tax consolidation or that have arisen prior to their inclusion in the tax consolidation are recognised when the conditions defined by IAS 12 are met: the entity has sufficient taxable temporary differences with a – single tax authority and for the same entity, which will generate taxable amounts against which unused tax losses and tax credits can be offset before they expire; it is likely that the entity will generate taxable profits before – unused tax losses and tax credits expire; unused tax losses result from identifiable causes, which will – probably not reoccur; opportunities related to the entity tax management will – generate taxable profits for the financial year during which unused tax losses and tax credits can be allocated. If it is unlikely that the entity will make sufficient profits to allocate unused tax losses or tax credits, deferred tax assets are not recognised.

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SOMFY – ANNUAL FINANCIAL REPORT 2017