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Annual report and accounts 2016

120 Notes to the

120 Notes to the consolidated financial statements continued 10 Tax continued For the year to December 31, 2015 € million Opening balance Movement in respect of prior years Movement in respect of current year Rate change Transfer Exchange movements Closing balance Fixed assets (1,126) 18 (10) 84 (47) (127) (1,208) Employee leaving indemnities and other employee related provisions 492 (6) (13) – – (1) 472 Tax losses carried forward 396 15 (42) – – 41 410 Fair value losses recognised on cash flow hedges 330 – (41) – – 9 298 Employee benefit plans 248 – (125) – – 45 168 Tax assets in relation to tax credits and deductions 89 (10) (1) – – – 78 Share-based payment schemes 22 3 (4) – – 1 22 Foreign exchange (16) 4 20 – – – 8 Deferred revenue in relation to customer loyalty programmes 17 – (16) – – – 1 Other items 39 9 (11) – 5 6 48 Total deferred tax 491 33 (243) 84 (42) (26) 297 Within tax in Other comprehensive income is a tax charge of €53 million that may be reclassified subsequently to the Income statement and a tax charge of €127 million that may not. Detailed deferred tax movement in respect of current year in the Income statement, Other comprehensive income and Statement of changes in equity For the year to December 31, 2016 Other comprehensive income Statement of changes in equity € million Income statement Total Fixed assets (8) – – (8) Employee leaving indemnities and other employee related provisions (99) – – (99) Tax losses carried forward (9) – – (9) Fair value losses recognised on cash flow hedges (5) (187) – (192) Employee benefit plans (13) 345 – 332 Share-based payment schemes (1) – (7) (8) Foreign exchange 6 – – 6 Deferred revenue in relation to customer loyalty programmes 1 – – 1 Other items (2) – – (2) Total deferred tax (130) 158 (7) 21 For the year to December 31, 2015 Other comprehensive income Statement of changes in equity € million Income statement Total Fixed assets (10) – – (10) Employee leaving indemnities and other employee related provisions (13) – – (13) Tax losses carried forward (42) – – (42) Fair value losses recognised on cash flow hedges 12 (53) – (41) Employee benefit plans 2 (127) – (125) Tax assets in relation to tax credits and deductions (1) – – (1) Share-based payment schemes – – (4) (4) Foreign exchange 20 – – 20 Deferred revenue in relation to customer loyalty programmes (16) – – (16) Other items (11) – – (11) Total deferred tax (59) (180) (4) (243) INTERNATIONAL AIRLINES GROUP Annual Report and Accounts 2016

121 c Reconciliation of the total tax charge in the Income statement The tax charge is calculated at the domestic rates applicable to profits or losses in the main countries of operation. The tax charge on the profit for the year to December 31, 2016 and 2015 is lower than the notional tax charge. The differences are explained below: € million 2016 2015 Accounting profit before tax 2,362 1,801 Tax calculated at 25 per cent in Spain (2015: 28 per cent), 20 per cent in the UK (2015: 20.25 per cent) and 12.5 per cent in Ireland (2015: 12.5 per cent) 1 466 381 Effects of: Non-deductible expenses – recurring items 12 6 Non-deductible expenses – non-recurring items 9 11 Current year tax assets not recognised 4 3 Tax on unremitted earnings – 3 Employee benefit plans accounted for net of withholding tax (6) (8) Investment credit (7) (6) Previously unrecognised tax assets (9) – Euro preferred securities accounted for as non-controlling interests (12) (4) Other items (2) 10 Adjustments in respect of prior years (2) (27) Tax rate changes (43) (84) Tax charge in the Income statement 410 285 1 The expected tax charge is calculated by aggregating the expected tax charges arising in each Group company. d Other taxes The Group also contributed tax and related revenues through payment of transaction and payroll related taxes and charges. A breakdown of these other taxes and charges paid during 2016 is as follows: € million 2016 2015 Payroll related taxes 495 455 UK Air Passenger Duty 848 923 Other ticket taxes and charges 1,626 1,583 2,969 2,961 The reduction in UK air passenger duty paid reflects foreign exchange movements and not a reduction in underlying payments. Strategic Report Corporate Governance Financial Statements Additional Information e Factors that may affect future tax charges Unrecognised temporary differences – losses € million 2016 2015 Spanish corporate income tax losses and deferred finance costs 47 35 UK capital losses arising before the change in ownership of the UK Group in 2011 34 101 UK capital losses arising after the change in ownership of the UK Group in 2011 8 10 UK capital losses arising on properties that were eligible for Industrial Buildings Allowances 296 350 Corporate income tax losses outside of the countries of main operation 170 154 Unrecognised temporary differences – investment in subsidiaries and associates No deferred tax liability has been recognised in respect of €170 million (2015: €795 million) of temporary differences relating to subsidiaries and associates. The Group either controls the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future or no tax consequences would arise from their reversal. UK tax rate changes A reduction in the UK corporation tax rate was substantively enacted in the year, in addition to those enacted in 2015. The main rate of corporation tax applicable from April 1, 2020 was reduced from 18 per cent to 17 per cent. The deferred tax on temporary differences and tax losses at December 31, 2016 was calculated at the rate applicable to the year in which the temporary differences and tax losses are expected to reverse. www.iairgroup.com

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