INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2019

Income tax expense is as follows:



	For the years ended December 31,
	2019	2018		2017
	(€ thousand)
Current tax expense	137,303	95,076		201,274
Deferred tax expense	32,145	66,325		8,718
Taxes relating to prior periods	7,208	(145,084	)	(1,232	)
Total income tax expense	176,656	16,317		208,760

Income tax reconciliation

The table below provides a reconciliation between actual income tax expense and the theoretical income tax expense, calculated on the basis of the applicable corporate tax rate in effect in Italy, which was 24.0 percent for each of the years ended December 31, 2019, 2018 and 2017.



	For the years ended December 31,
	2019		2018		2017
	(€ thousand)
Theoretical income tax expense, net of IRAP	210,088		192,706		179,077
Tax effect on:
Permanent and other differences	(76,187	)	(58,877	)	(7,061	)
Effect of changes in tax rate and tax regulations	733		—		4,862
Differences between foreign tax rates and the theoretical Italian tax rate and tax holidays	3,457		1,216		2,344
Taxes relating to prior years	7,208		(145,084	)	(1,232	)
Withholding tax on earnings	3,360		1,514		2,420
Total income tax expense/(benefit), net of IRAP	148,659		(8,525	)	180,410
Effective tax rate, net of IRAP	17.0	%	(1.1	)%	24.2	%
IRAP (current and deferred)	27,997		24,842		28,350
Total income tax expense	176,656		16,317		208,760

Disclosure of deferred tax liabilities

The analysis of deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018, is as follows:



	At December 31,
	2019		2018
	(€ thousand)
Deferred tax assets:
To be recovered after 12 months	16,445		27,297
To be recovered within 12 months	57,238		33,447
	73,683		60,744
Deferred tax liabilities:
To be realized after 12 months	(77,334	)	(14,497	)
To be realized within 12 months	(4,874	)	(24,645	)
	(82,208	)	(39,142	)
Net deferred tax (liabilities)/assets	(8,525	)	21,602

Disclosure of deferred tax assets

The analysis of deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018, is as follows:



	At December 31,
	2019		2018
	(€ thousand)
Deferred tax assets:
To be recovered after 12 months	16,445		27,297
To be recovered within 12 months	57,238		33,447
	73,683		60,744
Deferred tax liabilities:
To be realized after 12 months	(77,334	)	(14,497	)
To be realized within 12 months	(4,874	)	(24,645	)
	(82,208	)	(39,142	)
Net deferred tax (liabilities)/assets	(8,525	)	21,602

Disclosure of deferred income tax liabilities

The movements in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, are as follows:



	At December 31, 2018		Recognized in consolidated income statement		Charged to equity	Translation differences and other changes		At December 31, 2019
	(€ thousand)
Deferred tax assets arising on:
Provisions	108,147		(8,181	)	—	332		100,298
Deferred income	51,578		2,265		—	—		53,843
Employee benefits	2,474		—		456	—		2,930
Cash flow hedge reserve	1,176		—		610	—		1,786
Foreign currency exchange rate differences	859		578		—	—		1,437
Inventory obsolescence	38,275		13,626		—	71		51,972
Allowances for doubtful accounts	4,301		1,104		—	2		5,407
Depreciation	17,241		321		—	2		17,564
Other	11,147		5,858			690		17,695
Total deferred tax assets	235,198		15,571		1,066	1,097		252,932
Deferred tax liabilities arising on:
Depreciation	(9,303	)	572		—	(150	)	(8,881	)
Capitalization of development costs	(171,707	)	(53,144	)	—	—		(224,851	)
Employee benefits	(670	)	(80	)	—	—		(750	)
Exchange rate differences	(149	)	(251	)	—	1		(399	)
Cash flow hedge reserve	(1	)	1		—	—		—
Tax on undistributed earnings	(16,371	)	2,388		—	—		(13,983	)
Other	(15,395	)	2,798		—	4		(12,593	)
Total deferred tax liabilities	(213,596	)	(47,716	)	—	(145	)	(261,457	)
Total net deferred tax assets/(liabilities)	21,602		(32,145	)	1,066	952		(8,525	)



	At December 31, 2017		Recognized in consolidated income statement		Charged to equity		Translation differences and other changes		At December 31, 2018
	(€ thousand)
Deferred tax assets arising on:
Provisions	102,243		5,249		—		655		108,147
Deferred income	46,198		3,131		—		2,249		51,578
Employee benefits	2,562		—		(88	)	—		2,474
Cash flow hedge reserve	(2,432	)	—		3,608		—		1,176
Foreign currency exchange rate differences	740		119		—		—		859
Inventory obsolescence	37,615		521		—		139		38,275
Allowances for doubtful accounts	3,999		303		—		(1	)	4,301
Depreciation	16,570		399		—		272		17,241
Other	12,383		1,876		—		(3,112	)	11,147
Total deferred tax assets	219,878		11,598		3,520		202		235,198
Deferred tax liabilities arising on:
Depreciation	(8,930	)	(24	)	—		(349	)	(9,303	)
Capitalization of development costs	(114,775	)	(56,932	)	—		—		(171,707	)
Employee benefits	(1,868	)	(161	)	—		1,359		(670	)
Exchange rate differences	(647	)	501		—		(3	)	(149	)
Cash flow hedge reserve	(1	)	—		—		—		(1	)
Tax on undistributed earnings	—		(16,371	)	—		—		(16,371	)
Other	(10,652	)	(4,936	)	—		193		(15,395	)
Total deferred tax liabilities	(136,873	)	(77,923	)	—		1,200		(213,596	)
Deferred tax assets arising on tax loss carry-forward	109		—		—		(109	)	—
Total net deferred tax assets	83,114		(66,325	)	3,520		1,293		21,602

Disclosure of deferred income tax assets

The movements in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, are as follows:



	At December 31, 2018		Recognized in consolidated income statement		Charged to equity	Translation differences and other changes		At December 31, 2019
	(€ thousand)
Deferred tax assets arising on:
Provisions	108,147		(8,181	)	—	332		100,298
Deferred income	51,578		2,265		—	—		53,843
Employee benefits	2,474		—		456	—		2,930
Cash flow hedge reserve	1,176		—		610	—		1,786
Foreign currency exchange rate differences	859		578		—	—		1,437
Inventory obsolescence	38,275		13,626		—	71		51,972
Allowances for doubtful accounts	4,301		1,104		—	2		5,407
Depreciation	17,241		321		—	2		17,564
Other	11,147		5,858			690		17,695
Total deferred tax assets	235,198		15,571		1,066	1,097		252,932
Deferred tax liabilities arising on:
Depreciation	(9,303	)	572		—	(150	)	(8,881	)
Capitalization of development costs	(171,707	)	(53,144	)	—	—		(224,851	)
Employee benefits	(670	)	(80	)	—	—		(750	)
Exchange rate differences	(149	)	(251	)	—	1		(399	)
Cash flow hedge reserve	(1	)	1		—	—		—
Tax on undistributed earnings	(16,371	)	2,388		—	—		(13,983	)
Other	(15,395	)	2,798		—	4		(12,593	)
Total deferred tax liabilities	(213,596	)	(47,716	)	—	(145	)	(261,457	)
Total net deferred tax assets/(liabilities)	21,602		(32,145	)	1,066	952		(8,525	)



	At December 31, 2017		Recognized in consolidated income statement		Charged to equity		Translation differences and other changes		At December 31, 2018
	(€ thousand)
Deferred tax assets arising on:
Provisions	102,243		5,249		—		655		108,147
Deferred income	46,198		3,131		—		2,249		51,578
Employee benefits	2,562		—		(88	)	—		2,474
Cash flow hedge reserve	(2,432	)	—		3,608		—		1,176
Foreign currency exchange rate differences	740		119		—		—		859
Inventory obsolescence	37,615		521		—		139		38,275
Allowances for doubtful accounts	3,999		303		—		(1	)	4,301
Depreciation	16,570		399		—		272		17,241
Other	12,383		1,876		—		(3,112	)	11,147
Total deferred tax assets	219,878		11,598		3,520		202		235,198
Deferred tax liabilities arising on:
Depreciation	(8,930	)	(24	)	—		(349	)	(9,303	)
Capitalization of development costs	(114,775	)	(56,932	)	—		—		(171,707	)
Employee benefits	(1,868	)	(161	)	—		1,359		(670	)
Exchange rate differences	(647	)	501		—		(3	)	(149	)
Cash flow hedge reserve	(1	)	—		—		—		(1	)
Tax on undistributed earnings	—		(16,371	)	—		—		(16,371	)
Other	(10,652	)	(4,936	)	—		193		(15,395	)
Total deferred tax liabilities	(136,873	)	(77,923	)	—		1,200		(213,596	)
Deferred tax assets arising on tax loss carry-forward	109		—		—		(109	)	—
Total net deferred tax assets	83,114		(66,325	)	3,520		1,293		21,602