11 – Income taxes

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Million €

2013

2012

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

339

451

Foreign income tax

1,139

843

Taxes for prior years

(65)

(329)

Current tax expense

1,413

965

Deferred tax expense (+)/income (–)

127

(55)

Income taxes

1,540

910

Other taxes as well as sales and consumption taxes

342

330

Tax expense

1,882

1,240

Income before taxes and minority interests totaled €6,713 million (2012: €5,977 million). Of this amount, €1,885 million was attributable to Germany (2012: €1,897 million) and €4,828 million to foreign countries (2012: €4,080 million).

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 2013, the weighted average tax rate amounted to 13.3% as in the previous year. 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% rate.

For foreign Group companies, deferred taxes were calculated using the tax rates applicable in the individual foreign countries. These rates averaged 31.2% in 2013 and 22.6% in 2012.

Other taxes include real estate taxes and other comparable taxes of €99 million in 2013, and €93 million in 2012; they are allocated to the appropriate functional costs.

Changes in valuation allowances for deferred tax assets for tax loss carryforwards resulted in income of €6 million in 2013. In 2012 this resulted in an expense of €3 million.

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

 

2013

 

2012

 

Million €

%

 

Million €

%

Income before taxes and minority interests

6,713

 

5,977

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

1,007

15.0

 

897

15.0

Solidarity surcharge

8

0.1

 

10

0.2

German trade tax

185

2.7

 

231

3.8

Foreign tax-rate differential

750

11.2

 

298

5.0

Tax-exempt income

(258)

(3.8)

 

(107)

(1.8)

Non-deductible expenses

90

1.3

 

78

1.3

Income after taxes of companies accounted for using the equity method

(45)

(0.7)

 

(54)

(0.9)

Taxes for prior years

(65)

(1.0)

 

(329)

(5.5)

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

(16)

(0.2)

 

(26)

(0.4)

Other

(116)

(1.7)

 

(88)

(1.5)

Income taxes/effective tax rate

1,540

22.9

 

910

15.2

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. A planning horizon of one year was assumed for planned dividend distributions. A decrease in planned dividend distributions led to deferred tax income of €16 million in 2013 (2012: €26 million).

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

The rise in the foreign tax-rate differential was largely attributable to improved earnings in Norway. The disposal of shares in the Edvard Grieg development project as well as income from loss of control over GASCADE Gastransport GmbH did not result in tax expenses. Therefore tax credits in the amount of €193 million were included in tax-exempt income.

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Deferred tax assets and liabilities (million €)

 

Deferred tax assets

 

Deferred tax liabilities

 

2013

2012

 

2013

2012

Intangible assets

128

154

 

1,805

1,829

Property, plant and equipment

218

246

 

2,273

1,606

Financial assets

13

15

 

70

83

Inventories and accounts receivable

263

314

 

602

651

Provisions for pensions and similar obligations

1,573

2,087

 

461

514

Other provisions and liabilities

1,122

730

 

128

54

Tax loss carryforwards

363

572

 

Other

188

226

 

243

284

Netting

(2,733)

(2,787)

 

(2,733)

(2,787)

Valuation allowances for deferred tax assets

(143)

(84)

 

Thereof for tax loss carryforwards

(48)

(54)

 

Total

992

1,473

 

2,849

2,234

Thereof current

426

585

 

271

262

Deferred taxes result primarily from temporary differences between tax balances and the measurement of assets and liabilities according to IFRS as well as from tax loss carryforwards and unused tax credits. The remeasurement 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 €7,985 million in 2013 (2012: €7,946 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

 

2013

2012

 

2013

2012

Germany

1

12

 

1

Foreign

2,275

2,585

 

315

517

Total

2,276

2,597

 

315

518

German tax losses may be carried forward indefinitely. Foreign tax loss carryforwards exist primarily in the region Europe. Valuation allowances on deferred tax assets were reversed for tax loss carryforwards of €14 million. In 2012, valuation allowances on deferred tax assets were recognized for tax loss carryforwards of €6 million.

Tax obligations primarily include assessed income taxes and other taxes as well as estimated income taxes not yet assessed for the current year. Tax obligations amounted to €954 million in 2013 (2012: €870 million).