Income taxes

33. Income taxes

The tax expense consists of corporation and trade tax of domestic companies and comparable income taxes for foreign companies.

The taxation applies regardless of whether the income is reinvested or distributed. The implementation of the proposed distribution of net retained profits has no effect on the tax expense of the Group.

In accordance with IAS 12, deferred taxes are determined using the liability method. Under this method, deferred taxes are recognized for all accounting and measurement differences between the IFRS carrying amounts and the tax base if they balance each other out over time (temporary differences). If asset items under IFRSs have a higher value than in the tax base and these are temporary differences, a liability item is recognized for deferred taxes.

Deferred tax assets from accounting differences and benefits from the future utilization of tax loss carryforwards are capitalized if it is probable that future taxable earnings will be generated.

The tax rates valid at the time of realization of the asset or the settlement of the liability are used to calculate deferred tax assets and liabilities. These are measured using the tax rates of the individual Group companies. For domestic partnerships these comprise only trade tax and vary between 13.3 percent and 16.1 percent because of different assessment rates.

For domestic corporations a tax rate of 31.9 percent (previous year: 31.9 percent) was applied, comprising the corporation tax rate plus the solidarity surcharge and the trade tax rate for the main consolidated companies. The income tax rates for foreign Group companies ranged between 15.0 percent and 28.0 percent (previous year: between 15.0 percent and 28.0 percent).

Key components of income tax expense break down as follows:

¹ In the 2019 financial year, “Tax expense for prior periods” included income from the reversal of a tax provision of EUR 4,968,000.

Deferred taxes result from temporary differences between the tax bases of the companies and the carrying amounts in the consolidated statement of financial position using the liability method, as well as from the loss allowances for deferred taxes on temporary differences and loss carryforwards capitalized in previous years, from the reversal of loss allowances for temporary differences and loss carryforwards, from the use of loss carryforwards on which deferred taxes have been capitalized, from the elimination of loss carryforwards and from the initial recognition of deferred taxes on loss carryforwards.

Deferred income taxes

The deferred tax items reported as of the ends of the various reporting periods and the movements of deferred taxes within the reporting year relate to the items presented in the table.

EUR 11,251,000 (previous year: EUR 10,019,000) of the deferred taxes was classified as current and EUR -9,060,000 (previous year: EUR -8,122,000) as non-current. Of the changes in equity, EUR -5,000 was eliminated against other reserves and EUR -107,000 recognized in retained earnings.

The following deferred tax assets were not capitalized:

The assessment of the recoverability of deferred tax assets depends on the estimation of the probability of the reversal of the measurement differences and the utilization of the loss carryforwards which resulted in deferred tax assets. This is dependent upon the generation of future taxable profits during the periods in which those tax measurement differences are reversed and tax loss carryforwards can be utilized. The basis of the measurement is the three-year medium-term planning of the individual Group companies.

For subsidiaries that have suffered losses during the reporting year or the previous year, deferred tax assets of EUR 1,339,000 (previous year: EUR 1,795,000) were reported due to the improved earnings outlook.

As of December 31, 2020, the Group had tax loss carryforwards of EUR 275,400,000 (previous year: EUR 256,410,000). As of December 31, 2020, no deferred tax assets were capitalized for tax loss carryforwards of EUR 274,853,000 (previous year: EUR 255,550,000) of various subsidiaries. No deferred tax assets were recognized for these losses since these losses may not be used to offset taxable income elsewhere in the Group and they arose in subsidiaries that have generated tax losses for some time or will not generate sufficient taxable profits in the foreseeable future.

The deductible differences for which no deferred taxes were capitalized as of December 31, 2020 and December 31, 2019 relate to subsidiaries whose expected taxable income situation is not expected to allow the use of deferred tax assets.

Reconciliation of the effective tax rate and the effective income tax expense:

34. Income taxes on income and expenses recognized directly in equity

35. Reimbursement rights from income taxes

The tax assets related to reimbursement rights for the reporting year of EUR 292,000 (previous year: EUR 164,000) as well as reimbursement rights for previous years of EUR 930,000 (previous year: EUR 777,000).

Please refer to note 33 for information on rights arising from deferred taxes.

36. Payment obligations from income taxes

Please refer to note 33 for information on rights arising from deferred taxes.