KBC’s Ireland pledge helps shave future tax bill

KBC Bank Ireland has revealed that a surge in profits last year and its Belgian parent's recent commitment to the State will help shave tens of millions of euro off its future tax bills.

The Dublin-based bank said in its full 2016 annual report, filed with the Companies Registration Office last week, that its so-called level of deferred tax assets swelled by 56 per cent last year to €128.5 million from €82.4 million in 2015. Some €121.1 million of this relates to losses during the financial crisis that can be used to slash future corporate taxes paid to the exchequer.

"In 2016, the group recognised the previously unrecognised deferred tax assets in respect of unutilised tax losses during previous periods," KBC Bank Ireland said in the report. "The recognition was based on the group's return to profitability in 2015 and 2016 and the group's forecasts of future profitability in the short to medium term. This judgment was further validated by KBC Group's long-term commitment to Ireland to KBC Bank Ireland plc – as announced on 9 February 2017."

KBC Group, which has more than 1,000 employees in the State, where it has been established since 1978, said in February that its Irish unit will become one of its six "core countries" in a move that served to draw a line under more than two years of speculation about its future in the Irish market.

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Crisis losses

The bank is far from alone in using crisis-time losses to minimise tax payments. AIB has €3 billion of so-called deferred tax assets, which may take more than 20 years to use in full. Bank of Ireland expects that it will be able to cut its tax bill for the next 13 years using the €1.3 billion of similar tax assets it is sitting on, while Permanent TSB has a further €373 million.

Meanwhile KBC Bank Ireland reported last week that its profits fell in the third quarter this year as it set aside an additional €54.4 million to cover refunds, compensation and other costs related to overcharging of tracker mortgage customers going back as far as almost a decade. The amount is in addition of an initial €4.4 million provision taken by the lender last year to cover such cases.

KBC Bank Ireland’s net profit fell to €2.6 million in the quarter from €44.4 million for the same period last year.

Eleven current and former Irish mortgage lenders have acknowledged up to 27,527 cases of overcharging stemming from an examination ordered by the Central Bank two years ago. The five main banks involved – Bank of Ireland, AIB, Permanent TSB, Ulster Bank and KBC Bank Ireland – have signalled that they have either taken, or expect to take, up to €800 million of provisions to resolve the issue.