10 Income tax income/expense


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COMPONENTS OF TAX INCOME AND EXPENSE

 

 

€ million

 

2009

 

2008

Current tax expense, Germany

 

508

 

1,355

Current tax expense, abroad

 

812

 

1,087

Current tax expense

 

1,321

 

2,442

of which prior-period income

 

(–32)

 

(–41)

Income from reversal of tax provisions

 

–176

 

–104

Current income tax expense

 

1,145

 

2,338

Deferred tax income/expense, Germany

 

–360

 

–86

Deferred tax income/expense, abroad

 

–436

 

–332

Deferred tax income

 

–796

 

–418

Income tax income/expense

 

349

 

1,920

In Germany, current tax expense is calculated on the basis of a uniform corporation tax rate of 15% (previous year: 15%) plus a solidarity surcharge of 5.5%. In addition to corporation tax, trade tax is levied on profits generated in Germany. Due to the non-deductibility of trade tax as a business expense from fiscal year 2008, the average trade tax rate is 13.7%, which results in a total domestic tax rate of 29.5% (previous year: 29.5%).

The local income tax rates applied for companies outside Germany vary between 0% and 42%. In the case of split tax rates, the tax rate applicable to undistributed profits is applied.

The realization of tax benefits from tax loss carryforwards from previous years resulted in a reduction in current income taxes in 2009 by €65 million (previous year: €77 million).

Previously unused tax loss carryforwards amounted to €3,141 million (previous year: €2,172 million). Tax loss carryforwards amounting to €799 million (previous year: €808 million) can be used indefinitely, while €828 million (previous year: €95 million) must be used within the next ten years. There are additional tax loss carryforwards amounting to €1,518 million (previous year: €1,268 million) that can be used within a period of 15 to 20 years. Tax loss carryforwards of €198 million (previous year: €112 million) are estimated not to be usable.

The increase in tax loss carryforwards estimated not to be usable amounting to €86 million resulted primarily from the tax position of the Indian and Italian companies.

Deferred taxes are recognized where income from subsidiaries was tax-exempt in the past due to specific local regulations, but the tax effects on discontinuation of the temporary tax exemption are foreseeable. Tax benefits amounting to €55 million (previous year: €73 million) were recognized because of tax credits granted by various countries to compensate for the loss of tax relief where the amounts involved were unlimited. Tax credits granted for other reasons amounted to €67 million (previous year: €69 million)

No deferred tax assets were recognized for deductible temporary differences of €2 million (previous year: €2 million) and for tax credits of €562 million (previous year: €371 million) that would expire in the period from 2011 to 2023.

Due to the change in the statutory provisions in Germany, a refund claim for corporation tax was recognized as a current tax asset for the first time in fiscal year 2006. It was recognized in the balance sheet under current tax receivables at a present value of €951 million. The present value of the refund claim was €783 million at the balance sheet date.

Deferred tax expenses resulting from changes in tax rates amounted to €1 million (previous year: deferred tax income of €54 million).

Deferred taxes of €453 million were recognized without being offset by deferred tax liabilities in the same amount. The companies concerned expect positive tax income in future following losses in fiscal year 2009 or in the previous year.

As of the reporting date, €207 million of the deferred taxes recognized in the balance sheet was credited to equity (previous year: €1 million charged to equity) and relates to other comprehensive income. €4 million of this figure (previous year: €44 million) is attributable to minority interests. In fiscal year 2009, there was a €6 million (previous year: €2 million) reduction in deferred taxes resulting from changes in the consolidated Group.

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CHANGE IN TAX EFFECTS ON OTHER COMPREHENSIVE INCOME

 

 

 

 

€ million

 

Amount before taxes

 

Taxes

 

Amount after taxes

 

Amount before taxes

 

Taxes

 

Amount after taxes

 

 

 

 

 

2009

 

 

 

 

 

2008

Exchange differences on translating foreign operations

 

975

 

 

975

 

–1,445

 

 

–1,445

Actuarial gains/losses

 

–860

 

249

 

–611

 

190

 

–57

 

133

Cash flow hedges

 

–225

 

46

 

–179

 

–373

 

134

 

–239

Available-for-sale financial instruments
(marketable securities)

 

271

 

–80

 

191

 

–230

 

68

 

–162

Share of other comprehensive income of equity-accounted investments, net of tax

 

30

 

 

30

 

–188

 

 

–188

Other comprehensive income

 

191

 

216

 

406

 

–2,046

 

145

 

–1,901

DEFERRED TAXES CLASSIFIED BY BALANCE SHEET ITEM

The following recognized deferred tax assets and liabilities were attributable to recognition and measurement differences in the individual balance sheet items and to tax loss carryforwards:

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Deferred tax assets

 

Deferred tax liabilities

€ million

 

Dec. 31, 2009

 

Dec. 31, 2008

 

Dec. 31, 2009

 

Dec. 31, 2008

*

Prior-year figures have been adjusted.

Intangible assets

 

197

 

235

 

2,388

 

2,271

Property, plant and equipment, and leasing and rental assets

 

3,699

 

4,123

 

2,580

 

2,729

Noncurrent financial assets

 

756

 

1,059

 

4

 

2

Inventories

 

304

 

335

 

324

 

321

Receivables and other assets
(including Financial Services Division)*

 

622

 

822

 

5,931

 

7,103

Other current assets

 

82

 

129

 

20

 

41

Pension provisions

 

1,303

 

1,050

 

3

 

8

Other provisions

 

2,885

 

2,723

 

61

 

530

Liabilities*

 

1,309

 

1,657

 

245

 

499

Tax loss carryforwards

 

929

 

663

 

 

0

Valuation allowances on deferred tax assets

 

 

0

 

 

0

Gross value

 

12,084

 

12,796

 

11,558

 

13,504

of which noncurrent

 

(8,544)

 

(8,871)

 

(8,070)

 

(8,941)

Offset

 

9,185

 

9,885

 

9,185

 

9,885

Consolidation

 

113

 

433

 

–149

 

35

Amount recognized

 

3,013

 

3,344

 

2,224

 

3,654

In accordance with IAS 12, deferred tax assets and liabilities are offset if, and only if, they relate to income taxes levied by the same taxation authority and relate to the same tax period.

The tax expense of €349 million reported for 2009 (previous year: expense of €1,920 million) was €23 million lower (previous year: €29 million lower) than the expected tax expense of €372 million that would have resulted from application of a tax rate applicable to undistributed profits of 29.5% to the profit before tax of the Group.

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RECONCILIATION OF EXPECTED TO EFFECTIVE INCOME TAX

 

 

€ million

 

2009

 

2008

Profit before tax

 

1,261

 

6,608

Expected income tax expense
(tax rate 29.5%; previous year: 29.5%)

 

372

 

1,949

Reconciliation:

 

 

 

 

Effect of different tax rates outside Germany

 

–58

 

–141

Proportion of taxation relating to:

 

 

 

 

tax-exempt income

 

–476

 

–286

expenses not deductible for tax purposes

 

162

 

183

effects of loss carryforwards and tax credits

 

52

 

–47

temporary differences for which no deferred taxes were recognized

 

349

 

422

Tax credits

 

–47

 

–23

Prior-period tax expense

 

–33

 

–41

Effect of tax rate changes

 

1

 

–54

Other taxation changes

 

27

 

–42

Effective income tax income/expense

 

349

 

1,920

Effective tax rate (%)

 

27.7

 

29.1

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