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10 Income tax income/expense

COMPONENTS OF TAX INCOME AND EXPENSE

€ million

 

2022

 

2021

 

 

 

 

 

Current tax expense, Germany

 

1,180

 

1,230

Current tax expense, abroad

 

4,082

 

3,382

Current income tax expense

 

5,262

 

4,612

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

 

666

 

310

Deferred tax income (−)/expense (+) Germany

 

3,323

 

1,072

Deferred tax income (−)/expense (+) abroad

 

−2,377

 

−986

Deferred tax income (−)/expense (+)

 

946

 

86

Income tax income/expense

 

6,208

 

4,698

The statutory corporation tax rate in Germany for the 2022 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 46% (previous year: 0% and 50%). 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 2022 of €1,013 million (previous year: €700 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, 2022

 

Dec. 31, 2021

 

Dec. 31, 2022

 

Dec. 31, 2021

 

 

 

 

 

 

 

 

 

Non-expiring tax loss carryforwards

 

13,178

 

16,934

 

4,512

 

4,374

Expiry within 10 years

 

3,556

 

2,747

 

1,199

 

1,595

Expiry over 10 years

 

11,002

 

11,760

 

1,335

 

7,057

Total

 

27,736

 

31,441

 

7,045

 

13,026

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 €139 million (previous year: €32 million). Deferred tax expense was reduced by €1,687 million (previous year: €305 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 €70 million (previous year: €24 million). Deferred tax income resulting from the reversal of a write-down of deferred tax assets amounts to €34 million (previous year: €381 million).

Tax credits granted by various countries amounted to €493 million (previous year: €578 million).

No deferred tax assets were recognized for deductible temporary differences of €2,262 million (previous year: €2,157 million) and for tax credits of €159 million (previous year: €208 million) that would expire in the next 20 years.

In accordance with IAS 12.39, deferred tax liabilities of €265 million (previous year: €200 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 €31 million at Group level (previous year: €42 million).

Deferred tax assets of €1,731 million (previous year: €12,044 million) were recognized without being offset by deferred tax liabilities in the same amount. In fiscal year 2021, the existing deferred tax assets of companies within the German tax group, which had been 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.

€2,279 million (previous year: €7,281 million) of the deferred taxes recognized in the balance sheet was credited to equity and relates to other comprehensive income. €– 6 million (previous year: €27 million) of this figure is attributable to noncontrolling interests. In fiscal year 2022, deferred tax income of €2 million (previous year: €10 million) from the remeasurement of pension plans directly through equity was reclassified within equity. In the fiscal year under review and in the previous year, 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 2022, tax effects of €3 million resulting from equity transaction costs were credited to equity (previous year adjusted: €0 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, 2022

 

Dec. 31, 2021

 

Dec. 31, 2022

 

Dec. 31, 2021

 

 

 

 

 

 

 

 

 

Intangible assets

 

1,170

 

1,113

 

13,698

 

12,477

Property, plant and equipment, and lease assets

 

5,236

 

5,216

 

8,190

 

8,729

Noncurrent financial assets

 

55

 

135

 

193

 

301

Inventories

 

2,073

 

2,106

 

979

 

801

Receivables and other assets (including Financial Services Division)

 

2,097

 

1,775

 

10,069

 

9,516

Other current assets

 

4,077

 

4,455

 

76

 

24

Pension provisions

 

4,674

 

9,350

 

92

 

29

Liabilities and other provisions

 

13,968

 

14,269

 

5,644

 

5,298

Loss allowances on deferred tax assets from temporary differences

 

−236

 

−203

 

 

Temporary differences, net of loss allowances

 

33,115

 

38,215

 

38,941

 

37,175

Tax loss carryforwards, net of loss allowances

 

5,394

 

4,783

 

 

Tax credits, net of loss allowances

 

330

 

374

 

 

Value before consolidation and offset

 

38,839

 

43,372

 

38,941

 

37,175

of which attributable to noncurrent assets and liabilities

 

25,388

 

29,284

 

31,167

 

29,556

Offset

 

29,070

 

32,649

 

29,070

 

32,649

Consolidation

 

3,151

 

2,670

 

862

 

605

Amount recognized

 

12,921

 

13,393

 

10,734

 

5,131

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 2022 of €6,208 million (previous year: €4,698 million) was €405 million lower (previous year: €1,340 million) than the expected tax expense of €6,613 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

 

2022

 

2021

 

 

 

 

 

Profit before tax

 

22,044

 

20,126

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

 

6,613

 

6,038

Reconciliation:

 

 

 

 

Effect of different tax rates outside Germany

 

−561

 

−1,002

Proportion of taxation relating to:

 

 

 

 

tax-exempt income

 

−1,398

 

−1,078

expenses not deductible for tax purposes

 

1,101

 

1,041

effects of loss carryforwards

 

−1,247

 

−221

permanent differences

 

382

 

−326

Tax credits

 

−96

 

−133

Prior-period tax expense

 

688

 

262

Effect of tax rate changes

 

31

 

42

Nondeductible withholding tax

 

369

 

285

Other taxation changes

 

326

 

−210

Effective income tax expense

 

6,208

 

4,698

Effective tax rate in %

 

28.2

 

23.3

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.