10 Income tax income/expense

The statutory corporation tax rate in Germany for the 2020 assessment period was 15%. Including trade tax and the solidarity surcharge, this resulted in an aggregate tax rate of 30.0% (previous year: 29.8%).

A tax rate of 30.0% (previous year: 29.8%) was used to measure deferred taxes in the German consolidated tax group.

The local income tax rates applied to companies outside Germany vary, as in the previous year, 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 2020 of €392 million (previous year: €692 million).

The tax loss carryforwards and the expiry of loss carryforwards that could not be used changed as follows:

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 €55 million (previous year: €36 million). Deferred tax expense was reduced by €134 million (previous year: €66 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 €470 million (previous year: €58 million). Deferred tax income resulting from the reversal of a write-down of deferred tax assets amounts to €36 million (previous year: €35 million).

Tax credits granted by various countries amounted to €376 million (previous year: €378 million).

No deferred tax assets were recognized for deductible temporary differences of €899 million (previous year: €897 million) and for tax credits of €105 million (previous year: €138 million) that would expire in the next 20 years.

In accordance with IAS 12.39, deferred tax liabilities of €166 million (previous year: €231 million) for temporary differences and undistributed profits of Volkswagen AG subsidiaries were not recognized because control exists.

Deferred tax expense resulting from changes in tax rates amounted to €54 million at Group level (previous year: €116 million).

Deferred tax assets of €12,591 million (previous year: €1,006 million) were recognized without being offset by deferred tax liabilities in the same amount. In fiscal year 2020, the deferred tax assets of companies within the German tax group recognized due to positive results in the past were 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.

€7,997 million (previous year: €7,820 million) of the deferred taxes recognized in the balance sheet was credited to equity and relates to other comprehensive income. €53 million (previous year: €53 million) of this figure is attributable to noncontrolling interests. In fiscal year 2020, deferred tax income of €73 million from the remeasurement of pension plans directly through equity was reclassified within equity. The classification of changes in deferred taxes is presented in the statement of comprehensive income.

In fiscal year 2020, tax effects of €5 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:

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 2020 of €2,843 million (previous year: €4,326 million) was €657 million lower (previous year: €1,144 million) than the expected tax expense of €3,500 million that would have resulted from application of a tax rate for the Group of 30.0% (previous year: 29.8%) to the earnings before tax of the Group.