Taxation

6 Months Ended

Jun. 30, 2023

Major components of tax expense (income) [abstract]

6. Taxation

Prima facie tax reconciliation


Six months ended 30 June	2023 US$m	2022(a) US$m Restated(b)
Profit before taxation	6,930	12,315




Prima facie tax payable at UK rate of 23.5% (2022: 19%)(c)	1,628	2,340
Higher rate of taxation of 30% on Australian earnings (2022: 30%)	373	924
Other tax rates applicable outside the UK and Australia	(130)	68
Tax effect of profit from equity accounted units and related expenses(d)	(101)	(89)


Impact of changes in tax rates	—	(12)
Resource depletion allowances	(6)	(14)





Recognition of previously unrecognised deferred tax assets(e)	(62)	(209)
Write-down of previously recognised deferred tax assets	40	8
Utilisation of previously unrecognised deferred tax assets	(10)	(50)
Unrecognised current period operating losses(f)	259	71
Adjustments in respect of prior periods(g)	(4)	(137)
Other items	(4)	(33)
Total taxation charge	1,983	2,867

(a)Consistent with the presentation adopted in the 2022 Financial Statements, prima facie tax reconciliation comparatives have been revised. We have allocated the tax relating to exclusions (historically shown separately in the financial statements) to the appropriate tax line items above. The presentation of the impact of including profit after tax from equity accounted units within the Group profit before tax has also been revised as described in note (d) below.

(b)Comparative information has been restated to reflect the adoption of narrow scope amendments to IAS12 'Income Taxes', refer to note 2 for details.

(c)As a UK headquartered and listed Group, the reconciliation of expected tax on accounting profit to tax charge uses the UK corporation tax rate to calculate the prima facie tax payable. Given the increase in the UK corporation tax rate from 19% to 25% effective 1 April, the UK rate for the year will be 23.5%. Rio Tinto is also listed in Australia, and the reconciliation includes the impact of the higher tax rate in Australia where a significant proportion of the Group's profits are currently earned. The impact of other tax rates applicable outside the UK and Australia is also included. The weighted average statutory corporate tax rate on profit before tax is approximately 30% (30 June 2022: 29%).

(d)The Group profit before tax includes profit after tax of equity accounted units. Consequently, the tax effect on the profit from equity accounted units is included as a separate reconciling item in this prima facie tax reconciliation.

(e)Recognition of previously unrecognised deferred tax assets includes amounts in respect of Oyu Tolgoi where ongoing progress towards sustainable underground production reduces the risk that tax losses will expire if not recovered against taxable profits within eight years.

(f)Unrecognised current period operating losses include tax losses around the Group for which no tax benefit is currently recognised due to uncertainty for the purposes of IAS 12 regarding whether suitable taxable profits will be earned in future to obtain value for the tax losses.

6. Taxation (continued)

(g)In the six months ended 30 June 2022, adjustments in respect of prior periods include amounts related to the settlement of all tax disputes with the Australian Tax Office for the years 2010 to 2021.

Future tax developments

We continue to monitor and evaluate the Organisation for Economic Co-operation and Development’s (OECD) Two Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. Pillar Two of those proposals seeks to apply a 15% global minimum tax and was substantively enacted by the United Kingdom on 20 June 2023, with application from 1 January 2024.

We have adopted the guidance contained in International Tax Reform – Pillar Two Model Rules – Amendments to IAS 12 released on 23 May 2023 that provides a temporary mandatory exception from deferred tax accounting for Pillar Two. Under these amendments, any Pillar Two taxes incurred by the Group will be accounted for as current taxes from 1 January 2024. We are in the process of evaluating the cash tax implications of the global minimum tax rules and will include disclosures related to expected impacts, if any, in the Group’s 2023 full year consolidated financial statements.

On 17 May 2023, the Chamber of Deputies of Chile approved a new mining royalty which will impact Escondida through a 1% ad-valorem component and an increased operating margin component, all limited by a maximum overall tax rate of 46.5%. The new mining royalty will be effective as of 1 January 2024. The legislation was not substantively enacted at 30 June 2023 and therefore the impact on our results for the year ended 31 December 2023, which is not expected to be material, will be accounted for in the second half of the year following substantive enactment.