Income taxes

12 Months Ended

Dec. 31, 2023

Major components of tax expense (income) [abstract]

Income taxes

2.5. Income taxes

Accounting policies

Income tax expense comprises current tax and deferred tax.

Tax is recognized in the income statement except to the

extent that it relates to items recognized in other

comprehensive income, or directly in equity, in which case

the related tax is recognized in other comprehensive income

or equity, respectively.

Current taxes are calculated based on the results of the

Group companies in accordance with local tax laws and using

tax rates that are enacted or substantively enacted at the

reporting date. Corporate taxes withheld at the source of

the income on behalf of Group companies are accounted

for as income taxes when determined to represent a tax on

net income.

Deferred tax assets and liabilities are determined using the

balance sheet liability method for all temporary differences

arising between the tax bases of assets and liabilities and

their carrying amounts in the statement of financial

position. Deferred tax assets are recognized to the extent

it is probable that future taxable profit will be available

against which the unused tax losses, unused tax credits

and deductible temporary differences can be utilized in

the relevant jurisdictions. Deferred tax assets are assessed

for realizability at each reporting date. When facts and

circumstances indicate it is no longer probable that

deferred tax assets will be utilized, adjustments are made

as necessary.

Deferred tax liabilities are recognized for taxable temporary

differences, and for temporary differences that arise

between the fair value and the tax base of identifiable net

assets acquired in business combinations. Deferred tax

liabilities are not recognized if they arise from the initial

recognition of goodwill. Deferred tax liabilities are

recognized on taxable temporary differences associated

with investments in subsidiaries, associates and joint

arrangements, unless the timing of the reversal of the

temporary difference is controlled by Nokia, and it is

probable that the temporary difference will not reverse

in the foreseeable future. Nokia applies the exception to

recognizing and disclosing information about deferred

tax assets and liabilities related to Pillar Two income taxes.

Deferred tax assets and deferred tax liabilities are measured

using the enacted or substantively enacted tax rates at

the reporting date that are expected to apply in the

period when the asset is realized or the liability is settled.

Deferred tax assets and liabilities are not discounted.

Deferred tax assets and deferred tax liabilities are offset for

presentation purposes when there is a legally enforceable

right to set off current tax assets against current tax

liabilities, and the deferred tax assets and deferred tax

liabilities relate to income taxes levied by the same taxation

authority on either the same taxable entity or different

taxable entities which intend either to settle current tax

liabilities and assets on a net basis, or realize the assets and

settle the liabilities simultaneously in each future period

in which significant amounts of deferred tax liabilities or

deferred tax assets are expected to be settled or recovered.

Nokia periodically evaluates positions taken in tax returns

in situations where applicable tax regulation is subject to

interpretation. The amounts of current and deferred tax

assets and liabilities are adjusted when it is considered

probable, i.e. more likely than not, that certain tax positions

may not be fully sustained upon review by tax authorities.

The amounts recorded are based on the most likely amount

or the expected value, depending on which method Nokia

expects to better predict the resolution of the uncertainty,

at each reporting date.

Critical accounting judgment

Nokia is subject to income taxes in the jurisdictions in

which it operates. Judgment is required in determining

current tax expense, uncertain tax positions, deferred

tax assets and deferred tax liabilities; and the extent to

which deferred tax assets can be recognized. 

Estimates related to the recoverability of deferred tax

assets are based on forecast future taxable income

and tax planning strategies. Based on these estimates

and assumptions, at 31 December 2023 Nokia has

EUR 21 569 million (EUR 20 214 million in 2022) of

unused tax losses, unused tax credits and deductible

temporary differences for which no deferred tax assets

are recognized due to uncertainty of utilization. The

majority of the unrecognized deferred tax assets relate

to France.

The utilization of deferred tax assets is dependent on

future taxable profit in excess of the profit arising from

the reversal of existing taxable temporary differences.

The recognition of deferred tax assets is based on the

assessment of whether it is probable that sufficient

taxable profit will be available in the future to utilize the

unused tax losses, unused tax credits and deductible

temporary differences before the unused tax losses

and unused tax credits expire. Recognition of deferred

tax assets involves judgment regarding the future

financial performance of the particular legal entity

or tax group that has recognized the deferred tax asset.

At 31 December 2022, Nokia re-recognized deferred

tax assets of EUR 2.5 billion related to Finland in the

statement of financial position.

Components of the income tax expense/benefit

EURm	2023	2022	2021
Current tax expense	(431)	(426)	(409)
Deferred tax (expense)/benefit	(394)	2 452	137
Total	(825)	2 026	(272)

Income tax reconciliation

Reconciliation of the difference between income tax computed at the statutory rate in Finland of 

20% and income tax recognized in the income statement:

EURm	2023	2022	2021
Income tax expense at statutory rate	(300)	(437)	(385)
Permanent differences	139	87	47
Non-creditable withholding taxes	(41)	(72)	(37)
Income taxes for prior years(1)	22	3	95
Effect of different tax rates of subsidiaries operating in other jurisdictions	(140)	(68)	(57)
Effect of deferred tax assets not recognized(2)	(524)	(107)	(77)
Benefit arising from previously unrecognized deferred tax assets(3)	25	2 646	187
Net (increase)/decrease in uncertain tax positions	(15)	9	(29)
Change in income tax rates	32	24	17
Income taxes on undistributed earnings	(23)	(59)	(33)
Total	(825)	2 026	(272)

(1)In 2021, relates primarily to a tax benefit related to past operating model integration.

(2)In 2023, includes a remeasurement of deferred tax assets related to internal operating model change.

(3)In 2022, includes a re-recognition of deferred tax assets related to Finland.

Income tax liabilities and assets include a net liability of EUR 184 million (EUR 182 million in 2022)

relating to uncertain tax positions with inherently uncertain timing of cash outflows.

Prior period income tax returns for certain Group companies are under examination by local tax

authorities. Nokia has ongoing tax investigations in various jurisdictions, including the United

States, Canada, India, Brazil, Saudi Arabia, France, China and South Korea. Nokia’s business and

investments, especially in emerging market countries, may be subject to uncertainties, including

unfavorable or unpredictable tax treatment. Management judgment and a degree of estimation

are required in determining the tax expense or benefit. Even though management does not

expect that any significant additional taxes in excess of those already provided for will arise

as a result of these examinations, the outcome or actual cost of settlement may vary materially

from estimates.

Deferred tax assets and liabilities

Deferred tax assets and liabilities relate to the following:

	2023			2022
	Deferred	Deferred	Net	Deferred	Deferred	Net
EURm	tax assets	tax liabilities	balance	tax assets	tax liabilities	balance
Tax losses carried forward and unused tax credits	1 083	(21)		1 011	—
Undistributed earnings	—	(215)		—	(193)
Intangible assets and property, plant and equipment	2 962	(312)		3 267	(309)
Right-of-use assets	—	(177)		—	(177)
Defined benefit pension assets	—	(1 913)		—	(1 989)
Other non-current assets	83	(37)		66	(30)
Inventories	185	(18)		216	(18)
Other current assets	221	(93)		225	(95)
Lease liabilities	156	—		176	—
Defined benefit pension and other post-employment liabilities	991	—		925	—
Other non-current liabilities	14	(1)		18	—
Provisions	245	(138)		311	(73)
Other current liabilities	301	(184)		326	(154)
Other temporary differences	33	(17)		27	(28)
Total before netting	6 274	(3 126)	3 148	6 568	(3 066)	3 502
Netting of deferred tax assets and liabilities	(2 401)	2 401	—	(2 734)	2 734	—
Total after netting	3 873	(725)	3 148	3 834	(332)	3 502

In 2023 Nokia recognized a deferred tax expense and a decrease in deferred tax assets of

EUR 0.4 billion due to an internal transaction related to an operating model change that led

to a remeasurement of deferred tax assets in Finland and the United States.

Nokia has undistributed earnings of EUR 356 million (EUR 388 million in 2022) for which a

deferred tax liability has not been recognized as these earnings will not be distributed in the

foreseeable future.

Movements in the net deferred tax balance during the year:

EURm	2023	2022	2021
1 January	3 502	990	1 562
Recognized in income statement, continuing operations	(394)	2 452	137
Recognized in other comprehensive income	51	56	(753)
Other	(3)	2	(6)
Translation differences	(8)	2	50
31 December	3 148	3 502	990

In addition, at 31 December 2023, Nokia has unrecognized deferred tax assets of which

the majority relate to France. These deferred tax assets have not been recognized due to

uncertainty regarding their utilization. A significant portion of the French unrecognized deferred

tax assets are indefinite in nature and available against future French tax liabilities, subject to a

limitation of 50% of annual taxable profits.

Amount of temporary differences, tax losses carried forward and tax credits for which no

deferred tax asset was recognized due to uncertainty of utilization:

EURm	2023	2022
Temporary differences	1 743	1 579
Tax losses carried forward	19 482	18 324
Tax credits	344	311
Total	21 569	20 214

Expiry of tax losses carried forward and unused tax credits:

                                                                                                                               

	2023			2022
EURm	Recognized	Unrecognized	Total	Recognized	Unrecognized	Total
Tax losses carried forward
Within 10 years	1 375	1 025	2 400	1 344	1 247	2 591
Thereafter	17	—	17	—	4	4
No expiry	2 229	18 457	20 686	2 095	17 073	19 168
Total	3 621	19 482	23 103	3 439	18 324	21 763
Tax credits
Within 10 years	143	329	472	85	286	371
Thereafter	48	1	49	47	4	51
No expiry	154	14	168	117	21	138
Total	345	344	689	249	311	560

Nokia continually evaluates the probability of utilizing its deferred tax assets and considers both

positive and negative evidence in its assessment. At 31 December 2021, Nokia concluded based

on its assessment that it was not probable that it would have been able to utilize the unused

tax losses, unused tax credits and deductible temporary differences in Finland, which were

generated over a longer period including as a result of historical operating performance and

integration costs in Finland related to the 2016 acquisition of Alcatel-Lucent. This conclusion

was based on the weighting of objective negative evidence of cumulative taxable losses against

more subjective positive evidence. The primary factors in this weighting were the more objective

record of a pattern of historical financial performance compared to the more inherently

subjective expectations regarding future financial performance in Finland.

In 2022, Nokia generated accounting and taxable profit in Finland and there were improvements

in financial performance compared to preceding periods. The changes arose from the underlying

improvements in operating performance. These improvements are expected to be sustained in

the upcoming years, as well as over the longer term. In addition, Nokia has determined that, in

2022, a pattern of material taxable profits was re-established in Finland. Nokia’s re-established

pattern of profitability together with Nokia’s forecasts of future taxable profit in Finland

provides positive evidence about its ability to utilize the unused tax losses and deductible

temporary differences in Finland. At 31 December 2022, Nokia concluded based on its

assessment that it is probable that it will be able to utilize the unused tax losses and deductible

temporary differences and re-recognized deferred tax assets of EUR 2.5 billion in the statement

of financial position.

In 2023, Nokia generated accounting and taxable profit in Finland and continued to recognize

net deferred tax assets related to Finland. In performing its assessment, Nokia has not applied

any cut-off period, other than expiry under the relevant tax legislation. A significant portion of

Finnish deferred tax assets are indefinite in nature and available fully against future Finnish tax

liabilities. Due to the non-expiry of these assets, the sensitivity of future profit projections

affects mainly the period of time over which the deferred tax assets are expected to be utilized.

Income tax related to items of other comprehensive income

	2023			2022			2021
EURm	Gross	Tax	Net	Gross	Tax	Net	Gross	Tax	Net
Remeasurements of defined benefit plans	(343)	61	(282)	(424)	77	(347)	3 040	(755)	2 285
Translation differences	(535)	7	(528)	710	1	711	1 153	2	1 155
Net investment hedges	135	(27)	108	(127)	(20)	(147)	(249)	—	(249)
Cash flow and other hedges	(61)	10	(51)	83	(15)	68	—	—	—
Financial assets at fair value through other comprehensive income	10	—	10	(46)	13	(33)	7	—	7
Other decrease	(4)	—	(4)	(3)	—	(3)	—	—	—
Total	(798)	51	(747)	193	56	249	3 951	(753)	3 198

OECD Pillar Two model rules

Nokia is within the scope of the OECD Pillar Two model rules,

which introduce a global minimum tax rate of 15% per

jurisdiction. Pillar Two legislation has been enacted in Finland,

the jurisdiction in which Nokia is incorporated, and will come

into effect from 1 January 2024. Since the Pillar Two legislation

was not effective at the reporting date, Nokia has no related

current tax expense. Nokia applies the exemption to

recognizing and disclosing information about deferred tax

assets and liabilities related to Pillar Two income taxes, as

provided in the amendments to IAS 12 issued in May 2023.

Nokia has performed an analysis of the expected impact of the

Pillar Two legislation and based on this analysis the impact on

income tax expense and effective tax rate in the short term is

expected to be immaterial. The main elements of this analysis

were the following: 

■Current understanding of the interpretation of the rules.

■Applicability of the safe harbors for recent years provided

for in the Pillar Two legislation.

■Analysis of potential income tax expense in respect of

jurisdictions not meeting safe harbor tests.