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 13.1 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 19.0 percent and 27.0 percent (previous year: between 19.0 percent and 28.0 percent).

Key components of income tax expense break down as follows:

Deferred taxes result from temporary differences between the tax bases of the companies and the carrying amounts in the combined statement of financial position using the liability method, as well as from the valuation allowances for deferred taxes capitalized in prior periods on temporary differences and loss carryforwards, from the use of loss carryforwards for which deferred taxes had been capitalized, from the elimination of loss carryforwards and from the recognition of deferred taxes on interest carried forward.

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 7,935 thousand (previous year: EUR 4,538 thousand) of the deferred taxes was classified as current and EUR 1,975 thousand (previous year: EUR 526 thousand) as non-current. Of the changes in equity, EUR 585 thousand (previous year: EUR -280 thousand) was offset against other reserves and EUR 2,087 thousand (previous year: EUR 451 thousand) recognized in retained earnings.

Deferred tax assets

The recognition and measurement of other assets in the amount of EUR 43,144 thousand (previous year: EUR 51,667 thousand) principally related to the following line items:

• Loans to affiliated companies
• Loans to equity investments
• Trade receivables
• Other assets
• Trade payables
• Other current financial liabilities

The recognition and measurement of other liabilities in the amount of EUR 3,204 thousand (previous year: EUR 2,936 thousand) principally related to the following line items:

• Other non-current liabilities
• Government grants (current and non-current)

Deferred tax liabilities

The recognition and measurement of other assets in the amount of EUR -6,374 thousand (previous year: EUR -6,590 thousand) principally related to the following line items:

• Current finance receivables
• Trade receivables
• Cash and cash equivalents

The recognition and measurement of other liabilities in the amount of EUR -19,903 thousand (previous year: EUR -28,238 thousand) principally related to the following line items:

• Non-current loans
• Current portion of non-current loans
• Other current liabilities

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 availability for use of the loss and interest expense carryforwards which resulted in deferred tax assets. This is dependent upon the generation of future taxable earnings during the periods in which those tax measurement differences are reversed and tax loss and interest expense carryforwards are available for use. The basis of the measurement is the five-year medium-term planning of the individual Group companies.

As of the reporting date of December 31, 2023, the tax trust model had unused trade tax loss carryforwards of EUR 196,100 thousand for offsetting against future profits. Based on the positive results, the positive five-year plan and newly concluded customer contracts, we assume that EUR 14,130 thousand of the loss carryforwards will be utilized in the next five years. There are also temporary differences of EUR 23,961 thousand from revaluation reserves on provisions for pensions, provisions for the social future concept and heritable building rights, which we assume can also be utilized due to the aforementioned effects.

For these reasons, we recognized deferred taxes of EUR 6,056 thousand (previous year: EUR 0 thousand) on the utilization of loss carryforwards (EUR 14,130 thousand) and on temporary differences (EUR 23,961 thousand) at a tax rate of 15.9 percent as of the reporting date of December 31, 2023.

As of December 31, 2023, the Group had tax loss carryforwards of EUR 321,068 thousand (previous year: EUR 324,998 thousand). No deferred tax assets were capitalized for tax loss carryforwards of EUR 306,938 thousand (previous year: EUR 324,998 thousand) of various subsidiaries as of December 31, 2023. No deferred tax assets were recognized for these losses since these losses may not be used to offset taxable earnings of other Group companies and 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, 2023, and December 31, 2022, related to subsidiaries whose expected taxable income situation is deemed unlikely to allow the use of deferred tax assets.

Interest expense carryforwards of the Group amounted to EUR 27,040 thousand as of December 31, 2023 (previous year: EUR 30,649 thousand). No deferred tax assets were recognized for EUR 19,330 thousand (previous year: EUR 12,337 thousand) of this amount, as the respective Group companies are not expected to generate the EBITDA required for this purpose in the next five years.

Reconciliation of the effective tax rate and the effective income tax expense is presented in the table.

Minimum taxation

Minimum taxation laws (Pillar 2) have been enacted in some countries in which the BLG Group operates. The legislation will take effect for BLG’s financial year beginning on January 1, 2024. Accordingly, BLG has carried out an assessment of the potential risk from income taxes as part of the introduction of the German Minimum Tax Act (Mindeststeuergesetz – MinStG).

The assessment of the potential risks from income taxes for the MinStG is based on the most recent country-specific reporting and the annual financial statements of the individual BLG Group companies.

Based on this assessment, the effective tax rate in South Africa within the meaning of the MinStG is over 15 percent, hence no supplementary tax expense under the MinStG is anticipated here.

The Group has identified a potential risk from the assessment carried out relating to the profits generated in Poland, due to undercutting the minimum tax rate of 15 percent.

The average effective tax rate for these profits is 9.1 percent. If the provisions of the MinStG had already been applicable as of December 31, 2023, this would have increased the tax rate by 5.9 percent, leading to an additional tax expense of EUR 173 thousand for a relevant profit in Poland, less the capital allowance.

Due to the ongoing earnings situation in the USA, we assume that the temporary safe harbor relief will be applied, as losses are expected there.

In addition to the reference tax jurisdiction Germany, BLG LOGISTICS operates in a total of three other relevant tax jurisdictions, which together account for less than EUR 50 million in physical assets. BLG LOGISTICS will therefore submit an application within the meaning of Section 83 MinStG for exemption from the minimum tax in the first five financial years, insofar as no primary supplementary tax amount is levied that is based on a tax increase amount attributable to a foreign low-taxed business unit.

BLG LOGISTICS exercises the exemption from the recognition of deferred taxes in connection with Pillar 2 income taxes, which was the subject matter of the amendment to IAS 12 published in May 2023.