11 – Income taxes
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. Due to an increase in the rate of assessment for Ludwigshafen, Germany, the weighted average trade tax rate was 14.1% in 2015 (2014: 13.4%). As the increase had already been enacted in the previous year, the 30% rate used to calculate deferred taxes for German Group companies remained unchanged in 2015. The profits of foreign Group companies are assessed using the tax rates applicable in their respective countries. These are also generally used to calculate deferred taxes to the extent that tax rate adjustments for the future have not yet been enacted.
Tax expense
Million € |
|
2015 |
2014 |
---|---|---|---|
Current tax expense |
|
1,610 |
1,645 |
Corporate income tax, solidarity surcharge and trade taxes (Germany) |
|
514 |
528 |
Foreign income tax |
|
1,231 |
1,244 |
Taxes for prior years |
|
(135) |
(127) |
Deferred tax expense (+) / income (−) |
|
(363) |
66 |
From changes in temporary differences |
|
(314) |
66 |
From changes in tax loss carryforwards / unused tax credits |
|
(59) |
(41) |
From changes in the tax rate |
|
7 |
38 |
From valuation allowances on deferred tax assets |
|
3 |
3 |
Income taxes |
|
1,247 |
1,711 |
Other taxes as well as sales and consumption taxes |
|
302 |
266 |
Tax expense |
|
1,549 |
1,977 |
The BASF Group tax rate amounted to 22.5% in 2015 (2014: 23.8%). This lower rate was primarily attributable to lower contributions to income from countries with higher tax rates, especially Norway. Taxes for prior years primarily contained reversals of long-term tax provisions.
Changes in valuation allowances on deferred tax assets for tax loss carryforwards resulted in expenses of €4 million in 2015 and income of €3 million in 2014.
Other taxes included real estate taxes and other comparable taxes totaling €106 million in 2015 and €96 million in 2014.
Reconciliation of the effective tax rate and the tax rate in Germany |
|||||
|
|
2015 |
2014 |
||
---|---|---|---|---|---|
|
|
Million € |
% |
Million € |
% |
Income before taxes and minority interests |
|
5,548 |
– |
7,203 |
– |
Expected tax based on German corporate income tax (15%) |
|
832 |
15.0 |
1,080 |
15.0 |
Solidarity surcharge |
|
11 |
0.2 |
11 |
0.2 |
German trade tax |
|
234 |
4.2 |
217 |
3.0 |
Foreign tax-rate differential |
|
225 |
4.1 |
920 |
12.8 |
Tax-exempt income |
|
(103) |
(1.9) |
(354) |
(4.9) |
Nondeductible expenses |
|
239 |
4.3 |
111 |
1.5 |
Income after taxes of companies accounted for using the equity method |
|
(38) |
(0.7) |
(45) |
(0.6) |
Taxes for prior years |
|
(135) |
(2.4) |
(127) |
(1.8) |
Deferred tax liabilities for the future reversal of temporary differences associated with shares in participating interests |
|
(28) |
(0.5) |
(7) |
(0.1) |
Other |
|
10 |
0.2 |
(95) |
(1.3) |
Income taxes / effective tax rate |
|
1,247 |
22.5 |
1,711 |
23.8 |
Gains from the asset swap with Gazprom did not result in tax burdens. The previous year had included higher tax-exempt income in connection with the disposal of investments, especially of the shares in Styrolution and in VNG – Verbundnetz Gas AG, as well as the sale of oil and gas fields in the North Sea to the MOL Group.
Nondeductible expenses particularly included an impairment of the goodwill of the Exploration & Production business sector.
Future reversals of temporary differences for shares in investments that are assumed to have a planning horizon of one year led to deferred tax income of €28 million in 2015 (2014: €7 million).
Deferred taxes
Deferred tax assets and liabilities (in million €) |
|||||
|
|
Deferred tax assets |
Deferred tax liabilities |
||
---|---|---|---|---|---|
|
|
2015 |
2014 |
2015 |
2014 |
Intangible assets |
|
90 |
119 |
1,553 |
1,747 |
Property, plant and equipment |
|
182 |
199 |
3,322 |
3,195 |
Financial assets |
|
12 |
24 |
106 |
87 |
Inventories and accounts receivable |
|
251 |
294 |
517 |
766 |
Provisions for pensions |
|
2,410 |
2,687 |
472 |
487 |
Other provisions and liabilities |
|
1,346 |
1,574 |
177 |
152 |
Tax loss carryforwards |
|
271 |
388 |
– |
– |
Other |
|
164 |
155 |
107 |
146 |
Netting |
|
(2,873) |
(3,160) |
(2,873) |
(3,160) |
Valuation allowances for deferred tax assets |
|
(62) |
(87) |
– |
– |
Thereof for tax loss carryforwards |
|
(25) |
(40) |
– |
– |
Total |
|
1,791 |
2,193 |
3,381 |
3,420 |
Thereof current |
|
439 |
597 |
256 |
346 |
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.
Undistributed earnings of subsidiaries resulted in temporary differences of €9,241 million in 2015 (2014: €7,472 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.
Tax loss carryforwards
The regional distribution of tax loss carryforwards is as follows:
Tax loss carryforwards (in million €) |
|||||
|
|
Tax loss carryforwards |
Deferred tax assets |
||
---|---|---|---|---|---|
|
|
2015 |
2014 |
2015 |
2014 |
Germany |
|
1 |
1 |
– |
– |
Foreign |
|
2,490 |
2,302 |
246 |
348 |
Total |
|
2,491 |
2,303 |
246 |
348 |
Tax loss carryforwards exist in all regions, especially in Europe and Asia. German tax losses may be carried forward indefinitely. In foreign countries, tax loss carryforwards are in some cases only possible for a limited period of time. The bulk of the tax loss carryforwards will expire in Europe by 2018 and in Asia by 2020. No deferred tax assets were recognized for tax loss carryforwards of €1,767 million in 2015 (2014: €1,441 million).
Tax obligations
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 €1,082 million in 2015 (2014: €1,079 million).