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10 – Income taxes

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Million €

2012

2011

Corporate income tax, solidarity surcharge and trade taxes (Germany)

453

340

Foreign income tax

3,146

1,420

Taxes for prior years

(329)

28

Current tax expense

3,270

1,788

Deferred tax expense (+)/income (–)

(56)

579

Income taxes

3,214

2,367

Thereof income taxes on oil-producing operations

2,243

520

Other taxes as well as sales and consumption taxes

342

344

Tax expense

3,556

2,711

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

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Million €

2012

2011

Germany

1,908

3,343

Foreign oil production branches of German companies

2,417

564

Foreign

4,111

5,063

 

8,436

8,970

In Germany, a uniform corporate income 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 municipality in which the company is represented. In 2012, the weighted average tax rate amounted to 13.3% (2011: 12.9%). 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 23.0% in 2012 and 28.5% in 2011.

Income taxes on foreign oil-producing operations 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 amounting to €1,880 million were calculated using a corporate income tax rate of 15.0%.

Other taxes include real estate taxes and other comparable taxes of €96 million in 2012, and €95 million in 2011; they are allocated to the appropriate functional costs.

Changes in valuation adjustments for deferred tax assets for tax loss carryforwards resulted in an expense of €4 million in 2012 and in an expense of €10 million in 2011.

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

 

2012

 

2011

 

Million €

%

 

Million €

%

Income before taxes and minority interests

8,436

 

8,970

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

1,265

15.0

 

1,346

15.0

Solidarity surcharge

10

0.1

 

8

0.1

German trade tax

233

2.8

 

334

3.7

Foreign tax-rate differential

327

3.9

 

684

7.6

Tax-exempt income

(108)

(1.3)

 

(366)

(4.1)

Non-deductible expenses

80

0.9

 

60

0.7

Income after taxes of companies accounted for using the equity method

(26)

(0.3)

 

(7)

(0.1)

Taxes for prior years

(329)

(3.9)

 

28

0.3

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

1,880

22.3

 

439

4.9

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

(26)

(0.3)

 

(23)

(0.2)

Other

(92)

(1.1)

 

(136)

(1.5)

Income taxes/effective tax rate

3,214

38.1

 

2,367

26.4

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. A planning horizon of one year was assumed for planned dividend distributions. A decrease in planned dividend distributions led to deferred tax income of €26 million in 2012 (2011: deferred tax expense of €23 million).

The increase in non-compensable foreign income taxes for oil-producing operations is attributable to full-year oil production in Libya.

The taxes for prior years primarily contain reversals of long-term tax provisions.

The decrease in the foreign tax-rate differential was chiefly attributable to lower earnings contributions from Norway and North America.

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Deferred tax assets and liabilities (million €)

 

Deferred tax assets

 

Deferred tax liabilities

 

2012

2011

 

2012

2011

Intangible assets

154

184

 

1,846

1,840

Property, plant and equipment

312

304

 

1,957

2,127

Financial assets

15

18

 

83

99

Inventories and accounts receivable

325

343

 

651

732

Provisions for pensions and similar obligations

2,087

1,246

 

500

459

Other provisions and liabilities

802

1,056

 

54

59

Tax loss carryforwards

572

620

 

Other

228

163

 

286

181

Netting

(2,866)

(2,869)

 

(2,866)

(2,869)

Valuation allowances for deferred tax assets

(84)

(124)

 

Thereof for tax loss carryforwards

(54)

(107)

 

Total

1,545

941

 

2,511

2,628

Thereof short-term

587

392

 

265

404

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.

Undistributed earnings of subsidiaries resulted in temporary differences of €7,946 million in 2012 (2011: €5,281 million) for which deferred tax liabilities 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

 

2012

2011

 

2012

2011

Germany

12

17

 

1

2

Foreign

2,585

2,808

 

517

511

 

2,597

2,825

 

518

513

German tax losses may be carried forward indefinitely. Foreign tax loss carryforwards exist primarily in the regions North America and Europe. Valuation allowances on deferred tax assets were recognized for tax loss carryforwards of €9 million. In 2011, valuation allowances on deferred tax assets were recognized for tax loss carryforwards of €48 million.

Tax obligations comprise both tax liabilities and short-term tax provisions. Tax liabilities primarily concern 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 obligations (million €)

 

2012

2011

Tax provisions

440

434

Tax liabilities

640

604

 

1,080

1,038