10 Income tax income/expense

The statutory corporation tax rate in Germany for the 2018 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 29.8 % (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 2018 of €732 million (previous year: €422 million).

Previously unused tax loss carryforwards amounted to €20,501 million (previous year: €14,931 million). Tax loss carryforwards amounting to €13,217 million (previous year: €9,660 million) can be used indefinitely, while €636 million (previous year: €3,834 million) must be used within the next ten years. There are additional tax loss carryforwards amounting to €6,648 million (previous year: €1,437 million) that can be used within a period of 15 or 20 years. Tax loss carryforwards of €7,995 million (previous year: €7,222 million) were estimated not to be usable overall. Of these, €315 million (previous year: €343 million) will expire within five years, €2,165 million (previous year: €2,152 million) within 6 to 20 years and €126 million (previous year: €93 million) after 20 years. Tax loss carryforwards of €5,390 million (previous year: €4,634 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 €94 million (previous year: €114 million). Deferred tax expense was reduced by €116 million (previous year: €75 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 €95 million (previous year: €130 million). Deferred tax income resulting from the reversal of a write-down of deferred tax assets amounts to €231 million (previous year: €40 million).

Tax credits granted by various countries amounted to €385 million (previous year: €500 million).

No deferred tax assets were recognized for deductible temporary differences of €1,123 million (previous year: €1,028 million) and for tax credits of €123 million (previous year: €228 million) that would expire in the next 20 years, or for tax credits of €3 million (previous year: €0 million) that will not expire.

In accordance with IAS 12.39, deferred tax liabilities of €213 million (previous year: €266 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 €79 million at Group level (previous year: income of €1,044 million).

Deferred taxes in respect of temporary differences and tax loss carryforwards of €8,235 million (previous year: €8,344 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. €4,532 million (previous year: €3,655 million) of the deferred taxes recognized in the balance sheet was credited to equity and relates to other comprehensive income. €2 million (previous year: €2 million) of this figure is attributable to noncontrolling interests.

In the fiscal year under review, there were only immaterial changes arising from items that will not be reclassified to profit or loss and were recognized directly in equity. Changes in deferred taxes classified by balance sheet item are presented in the statement of comprehensive income.

The first-time application of IFRS 9 in the past fiscal year resulted in adjustments and reclassifications totaling €33 million, which were accounted for as a deduction from equity. In fiscal year 2018, tax effects of €6 million resulting from equity transaction costs were recognized in equity. The calling of the first tranche of the hybrid capital issued in September 2013 resulted in a reduction of equity in the amount of €5 million in the reporting period.

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 2018 of €3,489 million (previous year: €2,210 million) was €1,188 million lower (previous year: €1,878 million lower) than the expected tax expense of €4,677 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.

In the preceding 2017 fiscal year, the effects of changes in the tax rate had been impacted by the tax reform in the USA which brought a reduction in the corporate income tax rate from 35% to 21%, among other things.