LyondellBasell Industries N.V.

10. Income Taxes

For interim tax reporting, we estimate an annual effective tax rate which is applied to the year-to-date ordinary income. Tax effects of significant, unusual, or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur. Our effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, changes in valuation allowances, changes in foreign exchange gains or losses, the amount of exempt income, changes in unrecognized tax benefits associated with uncertain tax positions and changes in tax laws.

As of each reporting date, we consider the weight of all evidence, both positive and negative, to determine if a valuation allowance is necessary for each jurisdiction’s net deferred tax assets. We place greater weight on historical evidence over future predictions of our ability to utilize net deferred tax assets. We consider future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences, and taxable income in prior carry-back year(s) if carry-back is permitted under applicable law, as well as available prudent and feasible tax planning strategies that would, if necessary, be implemented to ensure realization of the net deferred tax asset.

Our exempt income primarily includes interest income, export incentives, and equity earnings of joint ventures. Interest income earned by certain of our subsidiaries through intercompany financings is taxed at rates substantially lower than the U.S. statutory rate. Export incentives relate to tax benefits derived from elections and structures available for U.S. exports. Equity earnings attributable to the earnings of our joint ventures, when paid through dividends to certain European subsidiaries, are exempt from all or portions of normal statutory income tax rates. We currently anticipate the favorable treatment for interest income, dividends, and export incentives to continue in the current year based on current law. The United Kingdom, as well as certain other jurisdictions in which we operate, enacted legislation implementing the Organization for Economic Cooperation and Development’s Pillar Two Model Rules effective as of January 1, 2024. This legislation did not have a material impact on the Consolidated Financial Statements, however, we continue to assess and monitor legislative changes.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. OBBBA includes tax reform extending and modifying certain key Tax Cuts & Jobs Act provisions such as accelerated tax deductions for qualified property and domestic research expenditures, and modifications to the limitations on deductions for interest expense. The provisions of the OBBBA have different effective dates where some are effective in 2025 and others not until 2026. This legislation does not have a material impact on the Consolidated Financial Statements.

Our effective income tax rate for the third quarter of 2025 was 3.2% compared to 19.4% for the third quarter of 2024. The lower effective tax rate for the third quarter of 2025 was primarily due to the increased relative impact of our tax rate drivers, primarily exempt income, due to lower earnings that decreased our effective income tax rate by 33.9 percentage points. The lower effective income tax rate for the third quarter of 2025 was also driven by non-cash impairments recognized discretely in the third quarter, for which there is largely no tax benefit, which decreased our effective tax rate by 7.8 percentage points. These decreases to the effective income tax rate were partially offset by the establishment of a valuation allowance against deferred tax assets, for which no tax benefit can be recognized, in the United Kingdom that increased the effective tax rate by 28.0 percentage points.

Our effective income tax rate for the first nine months of 2025 was (13.6)% compared to 20.4% for the first nine months of 2024. The lower effective tax rate for the first nine months of 2025 was primarily due to non-cash impairments recognized discretely in the third quarter, for which there is largely no tax benefit, which decreased our effective tax rate by 36.7 percentage points. This decrease was coupled with the increased relative impact of our tax rate drivers, primarily exempt income, due to lower earnings that decreased our effective income tax rate by 21.9 percentage points. These decreases were partially offset by the establishment of a valuation allowance against deferred tax assets, for which no tax benefit can be recognized, in the United Kingdom and fluctuations in foreign exchange gains and losses recognized discretely in 2025, which increased the effective tax rate by 15.0 and 10.7 percentage points, respectively.

Our activities in the United Kingdom are limited to a small number of manufacturing sites that are included in our United Kingdom tax group headed by LyondellBasell N.V., a holding company tax resident in the United Kingdom. LyondellBasell N.V., as a holding company, does not generate taxable income independently and therefore is dependent on the receipt of intercompany dividends to generate taxable income to offset its costs incurred. Given recent macroeconomic trends we believe intercompany dividends to LyondellBasell N.V. may be constrained. As a result, we no longer believe it is more likely than not the existing United Kingdom deferred tax assets will be realized. We will continue to monitor the situation as business and economic conditions change. If market conditions improve in future periods, it is possible that part of the deferred tax assets may be realized.