14. Income tax

Effective group’s tax rate slightly increase in 2021 compared to 2020, is mainly due to several non-recurring items that affected the income tax expense:

- a release of deferred tax assets for EUR 2,421 thousand related to equity movements due to the early termination of incentive plans aimed at a limited number of executives;

- in March 2021, the group reached an agreement with Italian Tax Agency regarding the so called "Patent Box regime", resulting in a retroactive EUR 7,559 thousand tax saving for the financial years 2016-2020. The Patent Box regime is a tax exemption related to, inter alia, the use of intellectual property assets. Business income derived from the use of each qualified intangible asset is partially exempted from taxation for both IRES and IRAP purposes. The Patent Box tax benefit relating to the years 2016-2020 is recorded within taxes relating to prior years.

- a gain on the sale of the minority interest in Swissfillon AG for EUR 12,258 thousand which is exempt from CIT;

- a tax accrual amounting to EUR 900 thousand related to an ongoing tax audit on fiscal year 2016.

For the year ended December 31, 2020 the effective group's tax rate significantly dropped compared to the year ended December 31, 2019, mainly due to the following three factors:

- Nuova Ompi S.r.l. opted to step up the tax net book value of part of its machinery by taking advantage from the "August Decree". The law allows Italian companies to revalue the tax value of the assets by paying a 3% one off tax on the higher value and deducting future depreciation at a notional tax rate; the tax saving amounts to EUR 7,926 thousand;

- Nuova Ompi S.r.l., in 2020, after concluding a series of investments in machinery, started to fully benefit from the so called "Industry 4.0 hyper depreciation", an Italian tax contribution aimed at supporting companies investing in high technology equipment;

- Ompi Pharm. Packing Techn. Co. Ltd, in 2020, concluded the procedure to obtain the so called "high tech license", a Chinese law that allows companies investing in R&D to benefit from a reduced corporate tax rate (15% instead of the notional 25%).

Unrecognized tax losses as at December 31, 2021 and as at December 31, 2020 amounts to EUR 3,800 thousand and to EUR 8,794 thousand respectively. Deferred tax assets have not been recognized in respect of such tax losses carry-forwards because it is not probable that future taxable profit will be available against which the Group can use the benefits therefrom.

Deferred taxes are calculated based on the global allocation criteria, taking into account the cumulative amount of all the temporary differences, based on the average expected rates in force when these temporary differences reverse.

Deferred tax assets are recorded if there is the reasonable certainty that the temporary differences will reverse in future years against assessable income not lower than the differences that will be reversed. In assessing the realizability of deferred tax assets, management considers whether it is probable that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and the tax loss carry-forwards are utilized.

The other effect movement includes foreign exchange differences and minor reclassification.