34 » Income Taxes

adidas AG and its German subsidiaries are subject to German corporate and trade taxes. For the years ending December 31, 2024 and 2023, the statutory corporate income tax rate of 15% plus a surcharge of 5.5% thereon is applied to earnings. The municipal trade tax is approximately 11.4% of taxable income.

For non-German subsidiaries, deferred taxes are calculated based on tax rates that have been enacted or substantively enacted by the closing date.

Deferred tax assets and liabilities

Deferred tax assets and liabilities are offset if:

• the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
• the deferred tax assets and the 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 to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

As a result they are presented in the consolidated statement of financial position as follows:

The movement of deferred taxes net is as follows:

Gross company deferred tax assets and liabilities after valuation allowances, but before appropriate offsetting, are attributable to the items detailed in the table below:

Deferred tax assets are recognized only to the extent that the realization of the related benefit is probable. For the assessment of probability, in addition to past performance and the respective prospects for the foreseeable future, appropriate tax structuring measures are also taken into consideration.

Deferred tax assets for which the realization of the related tax benefits is not probable decreased from € 308 million to € 293 million for the year ending December 31, 2024. The majority of this amount relates to capital tax losses in the US, which expire in 2027 and can only be offset against capital income. The remaining unrecognized deferred tax assets relate to subsidiaries operating in markets where the realization of the related tax benefit is not considered probable.

Tax expenses

Tax expenses are split as follows:

The deferred tax expense includes tax income of € 104 million in total (2023: tax expense of € 7 million) related to the origination and reversal of temporary differences.

The company’s applicable tax rate is 27.4% (2023: 27.4%), being the applicable income tax rate of adidas AG.

The company’s effective tax rate differs from the applicable tax rate of 27.4% as follows:

In 2024, the effective tax rate was 26.5%. The effective tax rate in 2023 was 189.2%.

The line item ‘Non-deductible expenses and tax-free income’ includes tax expense/benefits relating to tax-free income, movements in provisions for uncertain tax positions and tax expense/benefits relating to prior periods. In 2024, the tax expense relating to prior periods is € 35 million (2023: tax income of € 9 million).

For 2024, the line item ‘Losses for which benefits were not recognizable and changes in valuation allowances’ mainly relates to valuation allowances in respect of Argentina (€ 8 million) and a release of the valuation allowances for Hong Kong (€ 8 million) and Russia (€ 6 million). For 2023, this line item mainly related to changes in valuation allowances for Russia, the US and Argentina.

For 2024, the total tax benefit arising from previously unrecognized tax losses, credits, or temporary differences in prior years that lead to a reduction of current tax expense is below € 1 million (2023: € 6 million).

For 2024 the line item ‘Changes in tax rates’ mainly reflects a tax rate decrease in Switzerland. For 2023, there were no effects that exceed € 1 million.

The group is within the scope of the OECD Pillar Two model rules (Global Minimum Tax) and it applies the IAS 12 exception to the recognition and disclosure of information about deferred tax assets and liabilities related to Pillar Two income taxes. The group will incur top-up taxes due to the Pillar Two legislation that became effective January 1, 2024.

Under the legislation, the group is liable to pay a top-up tax for the difference between its Global Anti-Base Erosion (GloBE) effective tax rate per jurisdiction and the 15% minimum rate. The vast majority of entities within the group have an effective tax rate that exceeds 15%, with material exceptions for subsidiaries in the United Arab Emirates and Hong Kong.

Considering the impact of specific adjustments in the Pillar Two legislation, the group recognized a current income tax expense of € 4 million for the year 2024. This is included in income tax in the statement of profit or loss.