10 Income tax income/expense
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COMPONENTS OF TAX INCOME AND EXPENSE |
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€ million |
2016 |
2015 |
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Current tax expense, Germany |
885 |
812 |
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Current tax expense, abroad |
2,388 |
2,047 |
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Current income tax expense |
3,273 |
2,859 |
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of which prior-period income (−)/expense (+) |
(188) |
(142) |
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Deferred tax income (−)/expense (+), Germany |
−736 |
−2,075 |
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Deferred tax income (−)/expense (+), abroad |
−625 |
−725 |
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Deferred tax income (−)/expense (+) |
−1,361 |
−2,800 |
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Income tax income/expense |
1,912 |
59 |
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The statutory corporation tax rate in Germany for the 2016 assessment period was 15%. Including trade tax and the solidarity surcharge, this resulted in an aggregate tax rate of 29.9% (previous year: 29.8%).
A tax rate of 29.9% (previous year: 29.8%) was used to measure deferred taxes in the German consolidated tax group.
The local income tax rates applied for companies outside Germany vary between 0% and 45%. In the case of split tax rates, the tax rate applicable to undistributed profits is applied.
The realization of tax benefits from tax loss carryforwards from previous years resulted in a reduction in current income taxes in 2016 of €146 million (previous year: €302 million).
Previously unused tax loss carryforwards amounted to €17,686 million (previous year: €18,407 million). Tax loss carryforwards amounting to €11,494 million (previous year: €12,663 million) can be used indefinitely, while €4,237 million (previous year: €4,120 million) must be used within the next ten years. There are additional tax loss carryforwards amounting to €1,956 million (previous year: €1,624 million) that can be used within a period of 15 or 20 years. Tax loss carryforwards of €6,380 million (previous year: €10,478 million) were estimated not to be usable overall. Of these, €276 million (previous year: €398 million) will expire within five years, €2,341 million (previous year: €3,169 million) within 6 to 20 years and €38 million (previous year: €131 million) after more than 20 years. Tax loss carryforwards of €3,725 million (previous year: €6,779 million) that are estimated not to be usable will not expire.
The benefit arising from previously unrecognized tax losses or tax credits of a prior period that is used to reduce current tax expense in the current fiscal year amounts to €135 million (previous year: €50 million). Deferred tax expense was reduced by €211 million (previous year: €110 million) because of a benefit arising from previously unrecognized tax losses and tax credits of a prior period. Deferred tax expense resulting from the write-down of a deferred tax asset amounts to €297 million (previous year: €68 million). Deferred tax income resulting from the reversal of a write-down of deferred tax assets amounts to €304 million (previous year: €212 million).
Tax credits granted by various countries amounted to €756 million (previous year: €800 million).
No deferred tax assets were recognized for deductible temporary differences of €1,533 million (previous year: €1,643 million) and for tax credits of €353 million (previous year: €439 million) that would expire in the next 20 years, or for tax credits of €65 million (previous year: €14 million) that will not expire.
In accordance with IAS 12.39, deferred tax liabilities of €326 million (previous year: €193 million) for temporary differences and undistributed profits of Volkswagen AG subsidiaries were not recognized because control exists.
Due to the change in the statutory provisions in Germany, a refund claim for corporation tax was recognized as a current tax asset for the first time in fiscal year 2006. The present value of the refund claim was €134 million (previous year: €259 million) at the balance sheet date.
Deferred tax expense resulting from changes in tax rates amounted to €120 million at Group level (previous year: €2 million income).
Deferred taxes in respect of temporary differences and tax loss carryforwards of €9,890 million (previous year: €8,466 million) were recognized without being offset by deferred tax liabilities in the same amount. The deferred tax assets of companies within the German tax group were recognized due to positive results in the past and are included in this analysis. The companies concerned are expecting positive tax income in the future, following losses in the reporting period or the previous year.
€5,486 million (previous year: €5,320 million) of the deferred taxes recognized in the balance sheet was credited to equity and relates to other comprehensive income. €3 million (previous year: €2 million) of this figure is attributable to noncontrolling interests. There were effects from capital transactions with noncontrolling interest shareholders in the prior-year period. Changes in deferred taxes classified by balance sheet item are presented in the statement of comprehensive income.
In the previous year, tax effects of €11 million resulting from equity transaction costs were recognized in equity.
DEFERRED TAXES CLASSIFIED BY BALANCE SHEET ITEM
The following recognized deferred tax assets and liabilities were attributable to recognition and measurement differences in the individual balance sheet items and to tax loss carryforwards:
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DEFERRED TAXES CLASSIFIED BY BALANCE SHEET ITEM |
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DEFERRED TAX ASSETS |
DEFERRED TAX LIABILITIES |
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€ million |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Intangible assets |
302 |
306 |
9,884 |
9,570 |
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Property, plant and equipment, and lease assets |
4,387 |
3,946 |
8,315 |
7,152 |
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Noncurrent financial assets |
26 |
24 |
24 |
23 |
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Inventories |
2,223 |
1,882 |
792 |
744 |
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Receivables and other assets (including Financial Services Division) |
2,107 |
1,577 |
7,273 |
7,188 |
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Other current assets |
2,768 |
3,029 |
92 |
148 |
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Pension provisions |
6,776 |
5,121 |
22 |
31 |
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Liabilities and other provisions |
10,746 |
11,532 |
2,750 |
2,241 |
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Valuation allowances on deferred tax assets from temporary differences |
−368 |
−330 |
– |
– |
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Temporary differences, net of valuation allowances |
28,967 |
27,087 |
29,152 |
27,097 |
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Tax loss carryforwards, net of valuation allowances |
3,365 |
2,455 |
– |
– |
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Tax credits, net of valuation allowances |
337 |
347 |
– |
– |
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Value before consolidation and offset |
32,670 |
29,889 |
29,152 |
27,097 |
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of which noncurrent |
(21,736) |
(19,050) |
(23,681) |
(22,062) |
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Offset |
25,198 |
24,110 |
25,198 |
24,110 |
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Consolidation |
2,284 |
2,248 |
791 |
1,446 |
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Amount recognized |
9,756 |
8,026 |
4,745 |
4,433 |
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In accordance with IAS 12, deferred tax assets and liabilities are offset if, and only if, they relate to income taxes levied by the same taxation authority and relate to the same tax period.
The tax expense reported for 2016 of €1,912 million (previous year: €59 million) was €268 million lower (previous year: €447 million higher) than the expected tax expense of €2,180 million that would have resulted from application of a tax rate for the Group of 29.9% (previous year: 29.8%) to the earnings before tax of the Group.
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RECONCILIATION OF EXPECTED TO EFFECTIVE INCOME TAX |
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€ million |
2016 |
2015 |
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Earnings before tax |
7,292 |
−1,301 |
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Expected income tax income (−) / expense (+) (tax rate 29.9%; previous year: 29.8%) |
2,180 |
−388 |
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Reconciliation: |
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Effect of different tax rates outside Germany |
−446 |
−386 |
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Proportion of taxation relating to: |
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tax-exempt income |
−1,226 |
−1,976 |
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expenses not deductible for tax purposes |
409 |
2,155 |
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effects of loss carryforwards and tax credits |
35 |
155 |
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permanent differences |
12 |
43 |
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Tax credits |
−137 |
−84 |
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Prior-period tax expense |
234 |
46 |
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Effect of tax rate changes |
139 |
−2 |
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Nondeductible withholding tax |
437 |
439 |
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Other taxation changes |
275 |
57 |
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Effective income tax expense |
1,912 |
59 |
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