General
Information
Last Update:
March 1, 2012
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9 – Income taxes

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Million €

2011

2010

German corporate income tax, solidarity surcharge, trade taxes (Germany)

340

616

Foreign income tax

1,420

1,603

Taxes for prior years

28

(147)

Current taxes

1,788

2,072

Deferred tax expense (+)/income (–)

579

227

Income taxes

2,367

2,299

Thereof income taxes on oil-producing operations

520

1,175

Other taxes as well as sales and consumption taxes

344

284

Tax expense

2,711

2,583

Income before taxes and minority interests is broken down into domestic and foreign as follows:

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Million €

2011

2010

Germany

3,343

2,415

Foreign oil production branches of German companies

564

1,277

Foreign

5,063

3,681

 

8,970

7,373

In Germany, a uniform corporate tax rate of 15.0% as well as a solidarity surcharge of 5.5% thereon is levied on all paid out and retained earnings. In addition to corporate income tax, income generated in Germany is subject to a trade tax that varies depending on the municipalities in which the company is represented. In 2011, the weighted average tax rate amounted to 12.9% (2010: 12.8%). The profits of foreign Group companies are assessed using the tax rates applicable in their respective countries.

Deferred tax assets and liabilities in the Consolidated Financial Statements must be valued using the tax rates applicable for the period in which the asset or liability is realized or settled.

For German Group companies, deferred taxes were calculated using a uniform 29.0% rate.

For foreign Group companies, deferred taxes were calculated using the tax rates applicable in the individual foreign countries. These rates averaged 28.5% in 2011 and 23.1% in 2010.

Income taxes on foreign oil-producing operations in certain regions are compensable up to the level of the German corporate income tax on this foreign taxable income. The non-compensable amount is shown separately in the following table. Non-compensable foreign income taxes for oil production amounted to €439 million. This calculation is based on a corporate income tax rate of 15.0%.

Other taxes include real estate taxes and other comparable taxes in the amount of €95 million in 2011, and €99 million in 2010; they are allocated to the appropriate functional costs.

Changes in valuation adjustments to deferred tax assets for tax loss carryforwards resulted in an expense of €10 million in 2011 and in income of €4 million in 2010.

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Reconciliation from the statutory tax rate in Germany to the effective tax rate

 

 

2011

 

2010

 

Million €

%

 

Million €

%

Income before taxes and minority interests

8,970

 

7,373

Expected tax based on German corporate income tax (15%)

1,346

15.0

 

1,106

15.0

Solidarity surcharge

8

0.1

 

15

0.2

German trade income tax

334

3.7

 

347

4.7

Foreign tax-rate differential

684

7.6

 

299

4.1

Tax exempt income

(366)

(4.1)

 

(137)

(1.9)

Non-deductible expenses

60

0.7

 

71

1.0

Income after taxes of companies accounted for using the equity method

(7)

(0.1)

 

(30)

(0.4)

Taxes for prior years

28

0.3

 

(147)

(2.0)

Income taxes on oil-producing operations non-compensable with German corporate income tax

439

4.9

 

983

13.3

Deferred tax liabilities for the future reversal of temporary differences associated with shares in participations

(23)

(0.2)

 

77

1.1

Other

(136)

(1.5)

 

(285)

(3.9)

Income taxes/effective tax rates

2,367

26.4

 

2,299

31.2

For planned dividend distributions of Group companies and planned disposals, the resulting future income taxes and withholding taxes are recognized as deferred tax liabilities as long as they are expected to lead to a reversal of temporary differences. In the past, a planning horizon of three years was used for planned distributions of dividends. This time frame was reduced to one year in 2011, leading to deferred tax income of €81 million. An increase in planned dividend distributions led to a deferred tax expense of €23 million in 2011 (2010: €77 million).

The decrease in non-compensable foreign income taxes for oil-producing operations is attributable to the suspension of oil production in Libya, which lasted for several months.

Tax-exempt income primarily includes effects from the disposal of shares in K+S Aktiengesellschaft and the transfer of business activities to the joint venture Styrolution.

The increased influence of the foreign tax rate differential for income from foreign group companies resulted from higher earnings of Group companies in Europe.

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Deferred tax assets and liabilities (million €)

 

 

 

 

Deferred tax assets

 

Deferred tax liabilities

 

2011

2010

 

2011

2010

Intangible assets

184

209

 

1,840

1,710

Property, plant and equipment

304

250

 

2,127

2,163

Financial assets

18

13

 

99

116

Inventories and accounts receivable

343

301

 

732

504

Provisions for pensions

1,246

1,278

 

459

529

Other provisions and liabilities

1,056

939

 

59

38

Tax loss carryforwards

620

794

 

Other

163

293

 

181

246

Netting

(2,869)

(2,839)

 

(2,869)

(2,839)

Valuation allowances for deferred tax assets

(124)

(126)

 

Thereof for tax loss carryforwards

(107)

(86)

 

Total

941

1,112

 

2,628

2,467

Thereof short-term

392

507

 

404

370

Deferred taxes result primarily from temporary differences between tax balances and the valuation of assets and liabilities according to IFRS as well as from tax loss carryforwards and unused tax credits. The revaluation of all the assets and liabilities associated with acquisitions according to IFRS 3 has resulted in significant deviations between fair values and the values in the tax accounts. This leads primarily to deferred tax liabilities.

Deferred tax assets were offset against deferred tax liabilities of the same maturity if they were related to the same taxation authority.

Deferred tax liabilities for undistributed earnings of subsidiaries in the amount of €5,281 million in 2011 and €3,576 million in 2010 were not recognized, as they are either not subject to taxation on payout or they are expected to be reinvested for indefinite periods of time.

The regional distribution of tax loss carryforwards is as follows:

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Tax loss carryforwards (million €)

 

 

Tax loss carryforwards

 

Deferred tax assets

 

2011

2010

 

2011

2010

Germany

17

19

 

2

3

Foreign

2,808

3,004

 

511

705

 

2,825

3,023

 

513

708

German tax losses may be carried forward indefinitely. Foreign tax loss carryforwards exist primarily in North America, where they will first expire starting in 2021, and in Europe, where they will first expire in 2016. Tax loss carryforwards in North America were reduced in 2011 as a result of high earnings. Valuation allowances on deferred tax assets were recognized for tax loss carryforwards of €48 million. In 2010, valuation allowances on deferred tax assets were reversed for tax loss carryforwards of €78 million.

Tax obligations comprise both tax liabilities and short-term tax provisions. Tax liabilities primarily concern the assessed income taxes and other taxes. Tax provisions include estimated income taxes not yet assessed for the current and previous years.

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Tax liabilities (million €)

 

 

2011

2010

Tax provisions

434

499

Tax liabilities

604

641

 

1,038

1,140

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