10 Income tax income/expense

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COMPONENTS OF TAX INCOME AND EXPENSE
€ million		2012		2011
Current tax expense, Germany		2,360		2,758
Current tax expense, abroad		2,152		1,673
Current tax expense		4,513		4,431
of which prior-period expense income		(19)		(–7)
Income from reversal of tax provisions		–317		–80
Current income tax expense		4,196		4,351
Deferred tax income/expense, Germany		–308		–799
Deferred tax income/expense, abroad		–280		–425
Deferred tax income		–588		–1,225
Income tax income/expense		3,608		3,126

The statutory corporation tax rate in Germany for the 2012 assessment period was 15%. Including trade tax and the solidarity surcharge, this resulted in an aggregate tax rate of 29.5%.

The local income tax rates applied for companies outside Germany vary between 0% and 42%. 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 2012 of €319 million (previous year: €419 million).

Previously unused tax loss carryforwards amounted to €11,762 million (previous year: €8,628 million). Tax loss carryforwards amounting to €9,810 million (previous year: €6,742 million) can be used indefinitely, while €611 million (previous year: €582 million) must be used within the next ten years. There are additional tax loss carryforwards amounting to €1,341 million (previous year: €1,304 million) that can be used within a period of 15 or 20 years. Tax loss carryforwards of €9,885 million (previous year: €5,547 million), of which €724 million (previous year €551 million) can only be utilized subject to restrictions in the period from 2013 to 2028, were estimated not to be usable overall.

The increase in tax loss carryforwards estimated not to be usable resulted primarily from a reorganization within the Group, producing a tax loss of €3,000 million; based on the current earnings projections, this amount must be classified as unusable.

The benefit arising from previously unrecognized tax losses or tax credits of a prior period that is used to reduce current tax expense amounts to €67 million (previous year: €169 million). Deferred tax expense was reduced by €37 million (previous year: €23 million) because of a benefit arising from previously unrecognized tax losses and tax credits of a prior period. Deferred tax expense arising from the write-down of deferred tax assets amounts to €342 million (previous year: €86 million). Deferred tax income arising from the reversal of a write-down of a deferred tax asset amounts to €1 million (previous year: €– million).

Tax benefits amounting to €741 million (previous year: €679 million) were recognized because of tax credits granted by various countries.

No deferred tax assets were recognized for deductible temporary differences of €455 million (previous year: €159 million) and for tax credits of €409 million (previous year: €437 million) that would expire in the period from 2014 to 2029, or for tax credits of €45 million (previous year: €– million) that will not expire.

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. It was recognized in the balance sheet under current tax receivables at a present value of €951 million. The present value of the refund claim was €600 million at the balance sheet date.

Deferred tax income resulting from changes in tax rates amounted to €133 million at Group level (previous year: €41 million).

Deferred taxes of €437 million (previous year: €439 million) were recognized without being offset by deferred tax liabilities in the same amount. The companies concerned expect positive tax income in future following losses in the fiscal year under review or in the previous year.

€2,678 million (previous year: €1,790 million) of the deferred taxes recognized in the balance sheet was credited to equity and relates to other comprehensive income. €56 million of this figure (previous year: €37 million) is attributable to noncontrolling interests. In the fiscal year under review, deferred taxes declined by €10 million (previous year: €2 million) due to the effects of capital transactions with noncontrolling interests. Changes in deferred taxes classified by balance sheet item are presented in the statement of comprehensive income.

In the reporting period, tax effects of €14 million resulting from equity transaction effects were credited directly to the capital reserves.

Deferred taxes recognized directly in equity in the fiscal year are presented in detail in the statement of comprehensive income.

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 tax assets				Deferred tax liabilities
€ million		Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2012		Dec. 31, 2011
* Prior-period figures adjusted because of the updated purchase price allocation for MAN.
Intangible assets		218		348		9,140		4,568
Property, plant and equipment, and leasing and rental assets*		3,578		3,287		4,904		3,948
Noncurrent financial assets		39		33		41		23
Inventories		1,601		1,345		598		532
Receivables and other assets (including Financial Services Division)		1,309		964		5,608		5,136
Other current assets		1,456		1,113		171		199
Pension provisions		4,063		2,279		257		270
Liabilities and other provisions*		7,057		6,434		1,524		374
Tax loss carryforwards net of valuation allowances		807		938		–		–
Tax credits net of valuation allowances		285		264		–		–
Valuation allowances on other deferred tax assets		–114		–84		–		–
Gross value*		20,300		16,922		22,243		15,049
of which noncurrent*		(13,248)		(10,730)		(18,624)		(12,049)
Offset*		13,339		11,345		13,339		11,345
Consolidation		954		756		145		351
Amount recognized*		7,915		6,333		9,050		4,055

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 of €3,608 million reported for 2012 (previous year: €3,126 million) was €3,912 million (previous year: €2,457 million) lower than the expected tax expense of €7,520 million that would have resulted from application of a tax rate applicable to undistributed profits of 29.5% to the profit before tax of the Group. This difference resulted primarily from the measurement of the existing shares of Porsche Holding Stuttgart at fair value in the course of the business combination (see the disclosures on the basis of consolidation) and from the fair value measurement of the call and put options relating to the acquisition of the remaining interest in Porsche Holding Stuttgart, which do not have any tax effects in the Group.

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RECONCILIATION OF EXPECTED TO EFFECTIVE INCOME TAX
€ million		2012		2011
Profit before tax		25,492		18,926
Expected income tax expense (tax rate 29.5%; previous year 29.5%)		7,520		5,583
Reconciliation:
Effect of different tax rates outside Germany		–101		–38
Proportion of taxation relating to:
tax-exempt income		–1,131		–693
expenses not deductible for tax purposes		345		189
effects of loss carryforwards and tax credits		397		–102
temporary differences for which no deferred taxes were recognized		–3,413		–1,839
Tax credits		–110		–51
Prior-period tax expense		28		–6
Effect of tax rate changes		–133		–41
Other taxation changes		206		124
Effective income tax expense		3,608		3,126
Effective tax rate (%)		14.2		16.5