Taxes

The breakdown of tax expenses by origin was as follows:

Tax Expense by Origin

 

 

2017

 

2018

 

 

 

 

Of which income taxes

 

 

 

Of which income taxes

 

 

€ million

 

€ million

 

€ million

 

€ million

Taxes paid or accrued

 

 

 

 

 

 

 

 

Current income taxes

 

 

 

 

 

 

 

 

Germany

 

(794)

 

(794)

 

(1,210)

 

(1,210)

Other countries

 

(737)

 

(737)

 

(1,329)

 

(1,329)

Other taxes

 

 

 

 

 

 

 

 

Germany

 

(87)

 

 

 

(75)

 

 

Other countries

 

(118)

 

 

 

(162)

 

 

 

 

(1,736)

 

(1,531)

 

(2,776)

 

(2,539)

Deferred taxes

 

 

 

 

 

 

 

 

from temporary differences

 

70

 

70

 

2,058

 

2,058

from tax loss and interest carryforwards and tax credits

 

132

 

132

 

(126)

 

(126)

 

 

202

 

202

 

1,932

 

1,932

Total

 

(1,534)

 

(1,329)

 

(844)

 

(607)

Other taxes mainly included land, vehicle and other indirect taxes and are reflected in the respective functional cost items.

The deferred tax assets and liabilities were allocable to the following items in the statements of financial position:

Deferred Tax Assets and Liabilities

 

 

Dec. 31, 2017

 

Dec. 31, 2018

 

 

Deferred tax assets

Deferred tax liabilities

 

Deferred tax assets

Deferred tax liabilities

 

 

€ million

€ million

 

€ million

€ million

Intangible assets

 

799

1,469

 

860

6,995

Property, plant and equipment

 

79

323

 

451

882

Financial assets

 

204

81

 

158

193

Inventories

 

1,117

15

 

1,405

214

Receivables

 

60

464

 

154

568

Other assets

 

39

2

 

177

176

Provisions for pensions and other post-employment benefits

 

2,520

367

 

2,792

408

Other provisions

 

610

64

 

1,580

54

Liabilities

 

534

101

 

831

285

Tax loss and interest carryforwards

 

486

 

540

Tax credits

 

200

 

483

 

 

6,648

2,886

 

9,431

9,775

of which noncurrent

 

5,194

2,214

 

7,159

8,715

Set-off

 

(1,733)

(1,733)

 

(5,154)

(5,154)

Total

 

4,915

1,153

 

4,278

4,621

The use of tax loss carryforwards reduced current income taxes in 2018 by €157 million (2017: €47 million). The use of tax credits reduced current income taxes by €78 million (2017: €16 million).

Of the total tax loss and interest carryforwards of €8,677 million, including interest carryforwards of €174 million (2017: €6,443 million, including interest carryforwards of €148 million), an amount of €4,254 million, including interest carryforwards of €0 million (2017: €2,890 million, including interest carryforwards of €1 million) is expected to be usable within a reasonable period. The increase in tax loss and interest carryforwards mainly resulted from the transfer of tax loss carryforwards from Monsanto, and from impairments. Deferred tax assets of €540 million (2017: €486 million) were recognized for the amount of tax loss and interest carryforwards expected to be usable.

The use of €4,442 million of tax loss and interest carryforwards, including interest carryforwards of €174 million (2017: €3,553 million, including interest carryforwards of €147 million) was subject to legal or economic restrictions. Consequently, no deferred tax assets were recognized for this amount. If these tax loss and interest carryforwards had been fully usable, deferred tax assets of €378 million (2017: €351 million) would have been recognized.

Tax credits of €509 million were recognized in 2018 (2017: €200 million) as deferred tax assets. The increase in tax credits was mainly due to the acquisition of Monsanto. The use of €32 million (2017: €28 million) of tax credits was subject to legal or economic restrictions. Consequently, no deferred tax assets were recognized for this amount.

Expiration of Unusable Tax Credits and of Tax Loss and Interest Carryforwards

 

 

Tax credits

 

Tax loss and interest carryforwards

 

 

Dec. 31, 2017

Dec. 31, 2018

 

Dec. 31, 2017

Dec. 31, 2018

 

 

€ million

€ million

 

€ million

€ million

Within one year

 

4

1

 

17

22

Within two years

 

1

 

15

105

Within three years

 

2

 

114

222

Within four years

 

1

2

 

28

91

Within five years

 

19

 

70

69

Thereafter

 

4

26

 

3,309

3,913

Total

 

28

32

 

3,553

4,422

In 2018, subsidiaries that reported losses for 2018 or 2017 recognized net deferred tax assets totaling €1,487 million (2017: €2,303 million) from temporary differences and tax loss carryforwards. These assets were considered to be unimpaired because the companies concerned were expected to generate taxable income in the future.

Deferred tax liabilities of €44 million were recognized in 2018 (2017: €22 million) for planned dividend payments by subsidiaries. Deferred tax liabilities were not recognized for differences on €15,827 million (2017: €18,272 million) of retained earnings of subsidiaries because these earnings are to be reinvested for an indefinite period.

The reconciliation of expected to reported income tax expense (2018: €52 million; 2017: €246 million) and of the expected to the effective tax rate for the Group was as follows:

Reconciliation of Expected to Actual Income Tax Expense

 

 

2017

 

2018

 

 

€ million

%

 

€ million

%

1

Expected income tax expense is calculated by applying an expected weighted average tax rate to the pre-tax income of the Group. This average rate was determined on the basis of expected tax rates for the individual Group companies.

Expected income tax expense1 and expected tax rate

 

1,083

23.7

 

555

23.9

 

 

 

 

 

 

 

Reduction in taxes due to tax-free income

 

 

 

 

 

 

Income related to the operating business

 

(135)

(3.0)

 

(216)

(9.3)

Income from affiliated companies and divestment proceeds

 

(16)

(0.3)

 

(164)

(7.1)

 

 

 

 

 

 

 

First-time recognition of previously unrecognized deferred tax assets on tax loss and interest carryforwards

 

(31)

(0.7)

 

(58)

(2.5)

Use of tax loss and interest carryforwards on which deferred tax assets were not previously recognized

 

(4)

(0.1)

 

(11)

(0.5)

 

 

 

 

 

 

 

Increase in taxes due to non-tax-deductible expenses

 

 

 

 

 

 

Expenses related to the operating business

 

168

3.7

 

215

9.3

Impairment losses on investments in affiliated companies

 

 

14

0.6

 

 

 

 

 

 

 

New tax loss and interest carryforwards unlikely to be usable

 

69

1.5

 

64

2.8

Existing tax loss and interest carryforwards on which deferred tax assets were previously recognized but which are unlikely to be usable

 

1

 

76

3.3

 

 

 

 

 

 

 

Tax income (–) and expenses (+) relating to other periods

 

(128)

(2.8)

 

(42)

(1.8)

Tax effects of changes in tax rates

 

384

8.4

 

(208)

(9.0)

Other tax effects

 

(62)

(1.4)

 

382

16.5

 

 

 

 

 

 

 

Actual income tax expense and effective tax rate

 

1,329

29.0

 

607

26.2

The reported tax expense contains a one-time effect in the amount of €175 million that is due to the integration of Monsanto into Bayer’s corporate structures, along with an amount of €140 million resulting from the impairment losses recognized on the goodwill of Consumer Health. The reported tax expense for 2017 contained one-time effects of €455 million in connection with the tax reform in the United States (€409 million from changes in the tax rate and €46 million due to prior-period tax expense).

Compare to Last Year