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10 Income tax income/expense

COMPONENTS OF TAX INCOME AND EXPENSE

€ million

 

2021

 

2020

 

 

 

 

 

Current tax expense, Germany

 

1,230

 

940

Current tax expense, abroad

 

3,382

 

2,210

Current income tax expense

 

4,612

 

3,150

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

 

310

 

299

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

 

1,072

 

–1,026

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

 

–986

 

719

Deferred tax income (–)/expense (+)

 

86

 

–307

Income tax income/expense

 

4,698

 

2,843

The statutory corporation tax rate in Germany for the 2021 assessment period was 15%. Including trade tax and the solidarity surcharge, this resulted in an aggregate tax rate of 30.0% (previous year: 30.0%).

A tax rate of 30.0% (previous year: 30.0%) was used to measure deferred taxes in the German consolidated tax group.

The local income tax rates applied to companies outside Germany vary between 0% and 50% (previous year: 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 2021 of €700 million (previous year: €392 million).

The tax loss carryforwards and the expiry of loss carryforwards that could not be used changed as follows:

 

 

PREVIOUSLY UNUSED TAX LOSS CARRYFORWARDS

 

THEREOF UNUSABLE TAX LOSS CARRYFORWARDS

€ million

 

Dec. 31, 2021

 

Dec. 31, 2020

 

Dec. 31, 2021

 

Dec. 31, 2020

 

 

 

 

 

 

 

 

 

Non-expiring tax loss carryforwards

 

16,934

 

15,024

 

4,374

 

4,584

Expiry within 10 years

 

2,747

 

3,215

 

1,595

 

2,180

Expiry over 10 years

 

11,760

 

4,849

 

7,057

 

2,175

Total

 

31,441

 

23,088

 

13,026

 

8,939

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 €32 million (previous year: €55 million). Deferred tax expense was reduced by €305 million (previous year: €134 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 €24 million (previous year: €470 million). Deferred tax income resulting from the reversal of a write-down of deferred tax assets amounts to €381 million (previous year: €36 million).

Tax credits granted by various countries amounted to €578 million (previous year: €376 million).

No deferred tax assets were recognized for deductible temporary differences of €2,157 million (previous year: €899 million) and for tax credits of €208 million (previous year: €105 million) that would expire in the next 20 years. The increase in unrecognized deferred tax assets for deductible temporary differences is due to a change in tax laws in Italy.

In accordance with IAS 12.39, deferred tax liabilities of €200 million (previous year: €166 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 €42 million at Group level (previous year: €54 million).

Deferred tax assets of €12,044 million (previous year: €12,591 million) were recognized without being offset by deferred tax liabilities in the same amount. In fiscal year 2021, 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.

€7,281 million (previous year: €7,997 million) of the deferred taxes recognized in the balance sheet was credited to equity and relates to other comprehensive income. €27 million (previous year: €53 million) of this figure is attributable to noncontrolling interests. In fiscal year 2021, deferred tax income of €10 million (previous year: €73 million) from the remeasurement of pension plans directly through equity was reclassified within equity. In the fiscal year under review, there were effects from capital transactions with noncontrolling interests. The classification of changes in deferred taxes is presented in the statement of comprehensive income.

In fiscal year 2021, tax effects of €5 million resulting from equity transaction costs were debited to equity (previous year: credit of €5 million).

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, 2021

 

Dec. 31, 2020

 

Dec. 31, 2021

 

Dec. 31, 2020

 

 

 

 

 

 

 

 

 

Intangible assets

 

1,113

 

655

 

12,477

 

10,811

Property, plant and equipment, and lease assets

 

5,216

 

5,599

 

8,729

 

8,150

Noncurrent financial assets

 

135

 

17

 

301

 

97

Inventories

 

2,106

 

2,317

 

801

 

893

Receivables and other assets (including Financial Services Division)

 

1,775

 

1,858

 

9,516

 

10,236

Other current assets

 

4,455

 

4,480

 

24

 

242

Pension provisions

 

9,350

 

10,285

 

29

 

27

Liabilities and other provisions

 

14,269

 

13,284

 

5,298

 

5,156

Loss allowances on deferred tax assets from temporary differences

 

–203

 

–499

 

 

Temporary differences, net of loss allowances

 

38,215

 

37,997

 

37,175

 

35,611

Tax loss carryforwards, net of loss allowances

 

4,783

 

3,465

 

 

Tax credits, net of loss allowances

 

374

 

271

 

 

Value before consolidation and offset

 

43,372

 

41,733

 

37,175

 

35,611

of which attributable to noncurrent assets and liabilities

 

29,284

 

27,924

 

29,556

 

28,085

Offset

 

32,649

 

31,172

 

32,649

 

31,172

Consolidation

 

2,670

 

2,925

 

605

 

451

Amount recognized

 

13,393

 

13,486

 

5,131

 

4,890

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 2021 of €4,698 million (previous year: €2,843 million) was €1,340 million lower (previous year: €657 million) than the expected tax expense of €6,038 million that would have resulted from application of a tax rate for the Group of 30.0% (previous year: 30.0%) to the earnings before tax of the Group.

RECONCILIATION OF EXPECTED TO EFFECTIVE INCOME TAX

€ million

 

2021

 

2020

 

 

 

 

 

Profit before tax

 

20,126

 

11,667

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

 

6,038

 

3,500

Reconciliation:

 

 

 

 

Effect of different tax rates outside Germany

 

–1,002

 

–364

Proportion of taxation relating to:

 

 

 

 

tax-exempt income

 

–1,078

 

–1,501

expenses not deductible for tax purposes

 

1,041

 

540

effects of loss carryforwards

 

–221

 

520

permanent differences

 

–326

 

65

Tax credits

 

–133

 

–117

Prior-period tax expense

 

262

 

–211

Effect of tax rate changes

 

42

 

54

Nondeductible withholding tax

 

285

 

419

Other taxation changes

 

–210

 

–62

Effective income tax expense

 

4,698

 

2,843

Effective tax rate in %

 

23.3

 

24.4

Tax rate
The tax rate is the ratio of income tax expense to profit before tax, expressed in percent. It shows what percentage of the profit generated has to be paid over as tax.