10 Income tax income/expense

COMPONENTS OF TAX INCOME AND EXPENSE

€ million

 

2020

 

2019

 

 

 

 

 

Current tax expense, Germany

 

940

 

1,473

Current tax expense, abroad

 

2,210

 

2,673

Current income tax expense

 

3,150

 

4,147

of which prior-period income (−)/expense (+)

 

299

 

32

Deferred tax income (−)/expense (+), Germany

 

−1,026

 

115

Deferred tax income (−)/expense (+), abroad

 

719

 

65

Deferred tax income (−)/expense (+)

 

−307

 

180

Income tax income/expense

 

2,843

 

4,326

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:

 

 

PREVIOUSLY UNUSED TAX LOSS CARRYFORWARDS

€ million

 

Dec. 31, 2020

 

Dec. 31, 2019

 

 

 

 

 

Indefinitely to be carried forward

 

15,024

 

14,498

Carried forward within 10 years

 

3,215

 

568

Carried forward from 10 to 20 years

 

4,849

 

5,579

Total

 

23,088

 

20,645

 

 

EXPIRY OF UNUSABLE TAX LOSS CARRYFORWARDS

€ million

 

Dec. 31, 2020

 

Dec. 31, 2019

 

 

 

 

 

Non-expiring tax loss carryforwards

 

4,584

 

5,919

Expiry within 10 years

 

2,180

 

473

Expiry from 10 to 20 years

 

2,164

 

1,743

Expiry over 20 years

 

11

 

62

Total

 

8,939

 

8,197

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:

 

 

DEFERRED TAX ASSETS

 

DEFERRED TAX LIABILITIES

€ million

 

Dec. 31, 2020

 

Dec. 31, 2019

 

Dec. 31, 2020

 

Dec. 31, 2019

 

 

 

 

 

 

 

 

 

Intangible assets

 

655

 

267

 

10,811

 

10,555

Property, plant and equipment, and lease assets

 

5,599

 

5,576

 

8,150

 

8,493

Noncurrent financial assets

 

17

 

18

 

97

 

43

Inventories

 

2,317

 

2,348

 

893

 

821

Receivables and other assets (including Financial Services Division)

 

1,858

 

2,270

 

10,236

 

9,670

Other current assets

 

4,480

 

3,768

 

242

 

7

Pension provisions

 

10,285

 

9,013

 

27

 

52

Liabilities and other provisions

 

13,284

 

13,358

 

5,156

 

4,167

Loss allowances on deferred tax assets from temporary differences

 

−499

 

−141

 

 

Temporary differences, net of loss allowances

 

37,997

 

36,478

 

35,611

 

33,809

Tax loss carryforwards, net of loss allowances

 

3,465

 

3,068

 

 

Tax credits, net of loss allowances

 

271

 

239

 

 

Value before consolidation and offset

 

41,733

 

39,786

 

35,611

 

33,809

of which attributable to noncurrent assets and liabilities

 

27,924

 

26,307

 

28,085

 

26,736

Offset

 

31,172

 

29,627

 

31,172

 

29,627

Consolidation

 

2,925

 

2,947

 

451

 

826

Amount recognized

 

13,486

 

13,106

 

4,890

 

5,007

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.

RECONCILIATION OF EXPECTED TO EFFECTIVE INCOME TAX

€ million

 

2020

 

2019

 

 

 

 

 

Profit before tax

 

11,667

 

18,356

Expected income tax income (−)/expense (+)
(tax rate 30.0%; previous year: 29.8%)

 

3,500

 

5,470

Reconciliation:

 

 

 

 

Effect of different tax rates outside Germany

 

−364

 

−843

Proportion of taxation relating to:

 

 

 

 

tax-exempt income

 

−1,501

 

−1,124

expenses not deductible for tax purposes

 

540

 

509

effects of loss carryforwards

 

520

 

163

permanent differences

 

65

 

51

Tax credits

 

−117

 

−54

Prior-period tax expense

 

−211

 

−151

Effect of tax rate changes

 

54

 

116

Nondeductible withholding tax

 

419

 

359

Other taxation changes

 

−62

 

−170

Effective income tax expense

 

2,843

 

4,326

Effective tax rate in %

 

24.4

 

23.6