Question ID:
2015_1963
Legal Act:
Regulation (EU) No 575/2013 (CRR)
Topic:
Own funds
Article:
478
Paragraph:
1 and 2
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:
Regulation (EU) No 241/2014 - RTS for Own Funds requirements for institutions
Article/Paragraph:
14
Disclose name of institution / entity:
Yes
Name of institution / submitter:
Central Bank of Ireland
Country of incorporation / residence:
Ireland
Type of submitter:
Competent authority
Subject Matter:
Application of different Phase-In Rates for the Deduction of Deferred Tax Assets that Rely on Future Profitability
Question:

Article 478(2) of the CRR provides a discretion to competent authorities to apply a slower phase-in rate for the Deduction of Deferred Tax Assets that rely on Future Profitability for DTAs that existed prior to 1 January 2014. A 10% per annum phase in rate is applied for the DTAs that existed prior to 1 January 2014 while all other DTAs that were created post 1 January 2014 are subject to the normal phase in rates of 20% per annum. Clarification is required on how the different phase-in rates should be applied if the amount of DTAs (that rely on Future Profitability) in existence reduces below the initial amount recognised, due not to progressive deduction under the transition rules but rather due to usage against profit ? For example: Assume on 31 December 2014, the DTA balance is 100 which is made up of 60 that existed pre 1 January 2014 and 40 that existed post 1 January 2014. Assume that on 31 March 2015, the DTA balance reduces to 80 due to usage against profits. Should the DTA balance that existed pre 1 January 2014 be adjusted by the negative balances due to the DTA usage against profits i.e. should the slower phase-in rates be applied to the balance of 40?

Background on the question:

Banks with DTAs that rely on Future Profitability that existed pre 1 January 2014 and post 1 January 2014 are unclear how the two different phase-in rates that can be used under Article 478(1) and (2) of the CRR should be applied to DTAs that reduce below the initial amount recognised, due to usage against profit. It is not clear whether the amount of DTAs that existed pre 1 January 2014 should be phased-in using a static balance or whether this amount should be adjusted by the negative balances due to the DTA usage against profits.

Date of submission:
22/04/2015
Published as Rejected Q&A
11/02/2022
Rationale for rejection:

Please note that as part of adjustments to the Single Rulebook Q&A process, agreed by the EBA and the European Commission, it has been decided to reject outstanding questions submitted before 1 January 2020, when the Q&A process was updated as part of the last ESAs Review. In particular, the question that you have submitted has now regrettably been rejected and will not be addressed.

If you believe your question would still benefit from clarification, you are invited to resubmit your question, adapting it to reflect any legislative, regulatory or other relevant developments that may have occurred since the initial date of submission. The EBA will aim to address resubmitted questions as a matter of priority. When considering to resubmit, you are kindly requested to observe the updated admissibility criteria agreed in the context of the adjustment of the Q&A process, available in the Additional background and guidance for asking questions. We hope for your understanding.

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Status:
Rejected question
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