7. Income tax recognised in the income statement

Accounting policies

Income tax includes current and deferred taxes. Income tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is recognised in the same heading.

Tax on current income is calculated in accordance with tax criteria prevailing as of the balance sheet date.

Deferred tax is calculated in accordance with the balance sheet liability method on temporary differences between the carrying amount of assets and liabilities and the respective tax base. No deferred tax is calculated on Goodwill and initial recognition differences of an asset and liability if it does not affect profit and loss or tax results.

The measurement of deferred tax assets and liabilities should reflect the tax consequences from the way the Group estimates, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities.

The rate used to determine deferred tax is that in force during the period when temporary differences are reversed.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which temporary differences can be used. Deferred tax assets are revised on an annual basis and derecognised when it is no longer probable that they may be used.

For transactions with uncertainty regarding their tax treatment, the Group considers the effects of that uncertainty in the income tax estimations, whenever the tax authorities are not likely to accept the tax treatment given by the Group. Assets and liabilities related to uncertain tax positions are presented as deferred tax assets or liabilities.

For tax litigation and for all situations in which the position of the tax authorities is already known, an assessment is made on the probability of outcome, setting up provisions for the amounts estimated to represent future disbursements (when the probability of outcome is above 50%), or, proceeding with the payment (although maintaining the tax litigation), whenever it is considered to be the best way to protect the Group’s interest.

7.1. Income tax

The other gains/losses recorded include interest on late payments and compensations received for litigation decided in favour of the Group.

7.2. Reconciliation of effective tax rate

In 2024 and 2023, the Corporate Income Tax rate (CIT) applied to companies operating in Portugal was 21%. For companies with a positive tax result, there is a surcharge of 1.5% regarding municipal tax, and an additional state tax that varies between 3%, 5% and 9%, for taxable profits higher than €1.5 million, €7.5 million and €35 million, respectively.

Additionally, in 2023 it was in force a temporary solidarity contribution on the food distribution sector (CST Food Distribution), approved in 2022, applicable to companies that carry out food retail activities in Portugal, with the indication that it is intended to tackle the inflationary phenomenon. The CST Food Distribution corresponded to an additional rate of 33% on the taxable income that exceeded 20% of the average taxable income for the reference period (2018-2021). Its application was limited to the years 2022 and 2023.

In Poland, for 2024 and 2023, the income tax rate applied to taxable income was 19%.

In Colombia, the income tax rate was 35% in 2024 and 2023.

7.3. Deferred tax assets and liabilities

The Group did not recognise any amounts in deferred taxes regarding uncertain tax positions.

Deferred tax assets and liabilities were updated considering that from 2025 the IRC base rate in Portugal will be reduced to 20%. The impact of this change is not material.

7.4. Unrecognised deferred taxes on tax losses

The Group does not recognise deferred tax assets related to tax losses in respect of which, with reasonable accuracy, no sufficient future taxable profits are expected to guarantee the recovery of deferred tax assets in the short and/or medium-term. As of 31 December 2024, the unrecognised tax assets amounts to €308 million (€244 million in 2023), expiring in 2028 or later.

7.5. International Tax Reform – Pillar 2

Under Directive (EU) 2022/2523 of December 14, which introduced the rules of the so-called Pillar 2 in the European Union, Jerónimo Martins and the subsidiaries that are part of its full consolidation perimeter are considered as “constituent entities” covered by the new rules in the period from 2024, being part of a Group in which the ultimate parent entity is Sociedade Francisco Manuel dos Santos Holding N.V. (SFMS).

Among the jurisdictions where Jerónimo Martins operates, the Netherlands, Poland, Portugal, the Czechia and Slovakia have already transposed the above-mentioned Directive. Nevertheless, any additional tax may be due in respect of any jurisdiction where the Group headed by SFMS operates that has an effective tax rate of less than 15% (“low taxation”), due to a dynamic system of payment rules:

• The Qualified Domestic Minimum Top-Up Tax (QDMTT), to be paid by the constituent entities that are located and subject to low taxation in a given jurisdiction;
• The Income Inclusion Rule (IIR), which requires a parent entity to calculate and pay a supplementary tax in relation to constituent entities of that group that are subject to low taxation, regardless of their location;
• The Undertaxed Profits Rule (UTPR), according to which a constituent entity of a Multinational Group ensures the payment of the corresponding part of the supplementary tax of any entity in the Group that has not been charged through the QDMTT or IIR rules.

For the countries mentioned above, the new transposed legislation enters into force for fiscal years beginning on or after 1 January 2024, except with respect to the UTPR rule, which generally applies to fiscal years beginning on or after 1 January 2025.

Jerónimo Martins expects that no additional tax will be due in the jurisdictions in which it operates with reference to the period of 2024 due to the application of the transitional safe harbours provisions based on financial and tax information of the Country-by-Country Report (“Transitional CbCR Safe Harbours”) for the fiscal year 2023 and based on additional financial information regarding to the fiscal year 2024.

Jerónimo Martins will continue to study its exposure to Pillar 2 rules, with the collaboration and support of external consultants and experts in this area. However, some limitations remain in determining possible future impacts, as most jurisdictions have not yet published any forms or issued any administrative guidance to clarify the application of these rules.

Notwithstanding, as mentioned, at this date it is not anticipated that these new taxation rules will have a significant impact on the Consolidated Financial Statements, with no amount recognized in taxes in the income statement, related to Pillar 2, on 31 December 2024.