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30. Income taxes

Income taxes can be broken down as follows:

IRES (35)-
Benefit under consolidated tax mechanism-39
Tax related to previous periods382
Provisions for tax disputes(26)(18)
Deferred tax - net(58)4

In consideration of the changes in the company’s structure of Leonardo, which from an holding company became an operating company, in 2016 the Company showed tax profits with related recognition of income taxes (profit from national consolidated tax mechanism in 2015).

The accrual to provisions for tax disputes of €mil. 26 stems from the valuation of risks deriving from pending situations related to previous years.

Following is an analysis of the composition of the theoretical and effective tax rates for 2016 and 2015:

Profit (loss) before income taxes709417
Tax rate14.1%6.5%
Theoretical tax(195)(115)
Permanent differences(10)179
Timing differences(12)(7)
Revaluations of equity investments-(4)
Impairment of equity investments(52)(110)
IRAP tax(28)-
Net deferred tax assets58-
Tax provision(26)(18)
Previous years’ tax382
Total tax through profit or loss(100)27
Theoretical tax(27.5%)(27.5%)
Permanent differences not to reverse in subsequent years(1.4%)42.9%
Timing differences to reverse in subsequent years(1.7%)(1.6%)
Total dividends from profit or loss17.9%23.8%
Revaluations of equity investmentsn.a.(0.9%)
IRAP tax(4.0%)(26.3%)
Gains on equity investments(7.3%)n.a.
Net deferred tax assets8.2%n.a.
Tax provision(3.7%)(4.3%)
Current taxes of previous years5.4%0.4%
Total tax(14.1%)6.5%

The effective tax rate went from 6.5% in 2015 to 14.1% in 2016.

Deferred taxes and related receivables and payables at 31 December 2016 were the result of the following temporary differences:

 Income statementIncome statement
 Financial incomeFinancial expensesNetFinancial incomeFinancial expensesNet
Deferred tax assets on tax losses50(63)(13)---
Property, plant and equipment and intangible assets3-3---
Financial assets and liabilities2(4)(2)---
Severance and retirement benefits-(1)(1)---
Provision for risks and impairment94(128)(34)---
Effect of change in tax rate1(8)(7)---
Deferred taxes recognised through profit or loss169(227)(58)4- -

 31 December 201631 December 2015
 Financial statementFinancial statement
Deferred tax assets on tax losses58-5833--
Property, plant and equipment and intangible assets39(53)(14)---
Severance and retirement benefits9(4)5---
Financial assets and liabilities------
Provision for risks and impairment490-4907--
Deferred taxes recognised through balance sheet636(89)54740- -
Cash-flow hedge derivatives28(1)27---
On actuarial gains and losses5(2)3---
Deferred taxes recognised through equity33(3)30- - -
 669(92)57740- -