11 – Income taxes

Million €

 

2014

2013

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

 

528

339

Foreign income tax

 

1,244

1,139

Taxes for prior years

 

(127)

(65)

Current tax expense

 

1,645

1,413

Deferred tax expense (+)/income (−)

 

66

74

Income taxes

 

1,711

1,487

Other taxes as well as sales and consumption taxes

 

266

342

Tax expense

 

1,977

1,829

Income before taxes and minority interests totaled €7,203 million (2013: €6,600 million). Of this amount, €1,797 million was attributable to Germany (2013: €1,860 million) and €5,406 million to foreign countries (2013: €4,740 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 2014, the weighted average tax rate amounted to 13.4% (2013: 13.3%). Due to an increase in the rate of assessment for Ludwigshafen, the weighted average trade tax rate increased to 14% starting in 2015.

As a result, deferred taxes for German Group companies were calculated using a 30% rate (2013: 29%).

The profits of foreign Group companies are assessed using the tax rates applicable in their respective countries.

Deferred taxes in foreign countries were calculated using the tax rates applicable in the country in which they are based. These rates averaged 32.6% in 2014 and 30.8% in 2013.

Other taxes included real estate taxes and other comparable taxes of €96 million in 2014 and €99 million in 2013 and are allocated to functional costs.

Changes in valuation allowances for deferred tax assets for tax loss carryforwards resulted in income of €3 million in 2014 and €6 million in 2013.

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

 

 

2014

2013

 

 

Million €

%

Million €

%

Income before taxes and minority interests

 

7,203

6,600

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

 

1,080

15.0

990

15.0

Solidarity surcharge

 

11

0.2

8

0.1

German trade tax

 

217

3.0

182

2.7

Foreign tax-rate differential

 

920

12.8

718

10.9

Tax-exempt income

 

(354)

(4.9)

(258)

(3.9)

Non-deductible expenses

 

111

1.5

90

1.4

Income after taxes of companies accounted for using the equity method

 

(45)

(0.6)

(45)

(0.7)

Taxes for prior years

 

(127)

(1.8)

(65)

(1.0)

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

 

(7)

(0.1)

(16)

(0.2)

Other

 

(95)

(1.3)

(117)

(1.8)

Income taxes / effective tax rate

 

1,711

23.8

1,487

22.5

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 €7 million in 2014 (2013: €16 million).

The increase in the average trade tax rate in Germany resulted in a deferred tax expense of €37 million. Increases to the Group tax rate due to improved earnings in highly taxed countries, especially Norway, were partly offset by largely tax-exempt income in connection with the disposal of investments, especially the share in Styrolution and VNG – Verbundnetz Gas AG, as well as the sale of oil and gas fields in the North Sea to the MOL Group. Reversals of tax obligations from prior years also contributed to a reduction of the Group tax rate. In 2013, 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.

Deferred tax assets and liabilities (in million €)

 

 

Deferred tax assets

Deferred tax liabilities

 

 

2014

2013

2014

2013

Intangible assets

 

119

128

1,747

1,806

Property, plant and equipment

 

199

224

3,195

2,415

Financial assets

 

24

13

87

70

Inventories and accounts receivable

 

294

263

766

614

Provisions for pensions

 

2,687

1,577

487

463

Other provisions and liabilities

 

1,574

1,164

152

129

Tax loss carryforwards

 

388

423

Other

 

155

204

146

244

Netting

 

(3,160)

(2,847)

(3,160)

(2,847)

Valuation allowances for deferred tax assets

 

(87)

(143)

Thereof for tax loss carryforwards

 

(40)

(48)

Total

 

2,193

1,006

3,420

2,894

Thereof current

 

597

440

346

290

Deferred taxes result 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 €7,472 million in 2014 (2013: €7,985 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:

Tax loss carryforwards (in million €)

 

 

Tax loss carryforwards

Deferred tax assets

 

 

2014

2013

2014

2013

Germany

 

1

1

Foreign

 

2,302

2,379

348

375

Total

 

2,303

2,380

348

375

Tax loss carryforwards relate primarily to the regions Europe, Asia and North America. German tax losses may be carried forward indefinitely. In foreign countries, use of carryforwards is limited. The bulk of the tax loss carryforwards will expire in Europe by 2018, in Asia by 2019 and in North America by 2032. Valuation allowances on deferred tax assets were reversed for tax loss carryforwards of €14 million (2013: €14 million). No deferred tax assets were recognized for tax loss carryforwards of €1,441 million (2013: €1,350 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 €1,079 million in 2014 (2013: €968 million).