10 Income tax income/expense

The statutory corporation tax rate in Germany for the 2017 assessment period was 15%. Including trade tax and the solidarity surcharge, this resulted in an aggregate tax rate of 29.9% (previous year: 29.9%).

A tax rate of 29.9% (previous year: 29.9%) 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 2017 of €422 million (previous year: €146 million).

Previously unused tax loss carryforwards amounted to €14,931 million (previous year: €17,686 million). Tax loss carryforwards amounting to €9,660 million (previous year: €11,494 million) can be used indefinitely, while €3,834 million (previous year: €4,237 million) must be used within the next ten years. There are additional tax loss carryforwards amounting to €1,437 million (previous year: €1,956 million) that can be used within a period of 15 or 20 years. Tax loss carryforwards of €7,222 million (previous year: €6,380 million) were estimated not to be usable overall. Of these, €343 million (previous year: €276 million) will expire within five years, €2,152 million (previous year: €2,341 million) within 6 to 20 years and €93 million (previous year: €38 million) after 20 years. Tax loss carryforwards of €4,634 million (previous year: €3,725 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 €114 million (previous year: €135 million). Deferred tax expense was reduced by €75 million (previous year: €211 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 €130 million (previous year: €297 million). Deferred tax income resulting from the reversal of a write-down of deferred tax assets amounts to €40 million (previous year: €304 million).

Tax credits granted by various countries amounted to €500 million (previous year: €756 million).

No deferred tax assets were recognized for deductible temporary differences of €1,028 million (previous year: €1,533 million) and for tax credits of €228 million (previous year: €353 million) that would expire in the next 20 years, or for tax credits of €0 million (previous year: €65 million) that will not expire.

In accordance with IAS 12.39, deferred tax liabilities of €266 million (previous year: €326 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. As of the balance sheet date, the previous year’s refund claim (€134 million) had been amortized in full.

Deferred tax income resulting from changes in tax rates amounted to €1,044 million at Group level (previous year: expense of €120 million). This is primarily attributable to the effects of the tax reform in the United States.

Deferred taxes in respect of temporary differences and tax loss carryforwards of €8,344 million (previous year: €9,890 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.

€3,655 million (previous year: €5,486 million) of the deferred taxes recognized in the balance sheet was credited to equity and relates to other comprehensive income. €2 million (previous year: €3 million) of this figure is attributable to noncontrolling interests. In the fiscal year under review, changes of €−3 million arising from items that will not be reclassified to profit or loss were recognized directly in equity. Changes in deferred taxes classified by balance sheet item are presented in the statement of comprehensive income.

In fiscal year 2017, tax effects of €8 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 2017 of €2,275 million (previous year: €1,912 million) was €1,885 million lower (previous year: €268 million lower) than the expected tax expense of €4,160 million that would have resulted from application of a tax rate for the Group of 29.9% (previous year: 29.9%) to the earnings before tax of the Group.

The tax expense recognized in the fiscal year was reduced by €1,007 million on the basis of the tax reform passed in the United States, which envisages a reduction in the corporate income tax rate from 35% to 21%, among other things. The reduction resulted mainly from the remeasurement of deferred taxes of subsidiaries in the United States.