Taxes

The breakdown of tax expenses by origin was as follows:

Tax Expense by Origin

 

 

2016

 

2017

 

 

 

Of which income taxes

 

 

Of which income taxes

 

 

€ million

€ million

 

€ million

€ million

2016 figures restated

Taxes paid or accrued

 

 

 

 

 

 

Current income taxes

 

 

 

 

 

 

Germany

 

(864)

 

 

(794)

 

Other countries

 

(725)

 

 

(737)

 

Other taxes

 

 

 

 

 

 

Germany

 

(80)

 

 

(87)

 

Other countries

 

(137)

 

 

(118)

 

 

 

(1,806)

(1,589)

 

(1,736)

(1,531)

Deferred taxes

 

 

 

 

 

 

from temporary differences

 

524

 

 

70

 

from tax loss and interest carryforwards and tax credits

 

48

 

 

132

 

 

 

572

572

 

202

202

Total

 

(1,234)

(1,017)

 

(1,534)

(1,329)

The other taxes mainly include land, vehicle and other indirect taxes. They 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, 2016

 

Dec. 31, 2017

 

 

Deferred tax assets

Deferred tax liabilities

 

Deferred tax assets

Deferred tax liabilities

 

 

€ million

€ million

 

€ million

€ million

Intangible assets

 

1,478

1,766

 

799

1,469

Property, plant and equipment

 

264

692

 

79

323

Financial assets

 

240

224

 

204

81

Inventories

 

1,267

32

 

1,117

15

Receivables

 

71

547

 

60

464

Other assets

 

39

13

 

39

2

Provisions for pensions and other post-employment benefits

 

3,637

983

 

2,520

367

Other provisions

 

1,083

112

 

610

64

Liabilities

 

793

133

 

534

101

Tax loss and interest carryforwards

 

473

 

 

486

Tax credits

 

177

 

 

200

 

 

9,522

4,502

 

6,648

2,886

of which noncurrent

 

7,868

3,662

 

5,194

2,214

Set-off

 

(3,172)

(3,172)

 

(1,733)

(1,733)

Total

 

6,350

1,330

 

4,915

1,153

Deferred taxes on remeasurements, recognized outside profit or loss, of the net liability for defined benefit pension and other post-employment benefits diminished equity by €515 million (2016: increased equity by €228 million). Deferred taxes on changes, recognized outside profit or loss, in fair values of available-for-sale financial assets and derivatives designated as hedges increased equity by €56 million (2016: diminished equity by €24 million). These effects on equity are reported in the statement of comprehensive income.

The use of tax loss carryforwards reduced current income taxes in 2017 by €47 million (2016: €82 million). The use of tax credits reduced current income taxes by €16 million (2016: €16 million).

Of the total tax loss and interest carryforwards of €6,443 million, including interest carryforwards of €148 million (2016: €5,447 million, including interest carryforwards of €118 million), an amount of €2,890 million, including interest carryforwards of €1 million (2016: €2,269 million, including interest carryforwards of €0 million) is expected to be usable within a reasonable period. The increase in tax loss and interest carryforwards was mainly due to the current development of business in the United States and Brazil. Deferred tax assets of €486 million (2016: €473 million) were recognized for the amount of tax loss and interest carryforwards expected to be usable.

The use of €3,553 million of tax loss and interest carryforwards, including interest carryforwards of €147 million (2016: €3,178 million, including interest carryforwards of €118 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 €351 million (2016: €294 million) would have been recognized.

Tax credits of €200 million were recognized in 2017 (2016: €177 million) as deferred tax assets. The use of €28 million (2016: €37 million) of tax credits was subject to legal or economic restrictions. Consequently, no deferred tax assets were recognized for this amount.

Unusable tax credits, tax loss carryforwards and interest carryforwards will expire as follows:

Expiration of Unusable Tax Credits, Tax Loss and Interest Carryforwards

 

 

Tax credits

 

Tax loss and interest carryforwards

 

 

Dec. 31, 2016

Dec. 31, 2017

 

Dec. 31, 2016

Dec. 31, 2017

 

 

€ million

€ million

 

€ million

€ million

Within one year

 

4

4

 

4

17

Within two years

 

 

1

15

Within three years

 

4

 

31

114

Within four years

 

1

 

132

28

Within five years

 

29

19

 

31

70

Thereafter

 

4

 

2,979

3,309

Total

 

37

28

 

3,178

3,553

In 2017, subsidiaries that reported losses for 2017 or 2016 recognized net deferred tax assets totaling €2,303 million (2016: €2,575 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 €22 million were recognized in 2017 (2016: €41 million) for planned dividend payments by subsidiaries. Deferred tax liabilities were not recognized for differences on €18,272 million (2016: €20,069 million) of retained earnings of subsidiaries because these earnings are to be reinvested for an indefinite period.

The reported tax expense of €1,329 million for 2017 (2016: €1,017 million) differed by minus €246 million (2016: €135 million) from the expected tax expense of €1,083 million (2016: €1,152 million) that would have resulted from applying an expected weighted average tax rate to the pre-tax income of the Group. This average rate, derived from the expected tax rates of the individual Group companies, was 23.7% in 2017 (2016: 24.1%). The effective tax rate was 29.0% (2016: 21.3%).

The Reconciliation The reconciliation records, on the one hand, those business activities not assigned to any other segment (“All Other Segments”), including particularly the services provided by Business Services and Currenta. It also includes “Corporate Functions and Consolidation,” which largely comprises Bayer holding companies and Leaps by Bayer (formerly the Bayer Lifescience Center). of expected to reported income tax expense and of the expected to the effective tax rate for the Group was as follows:

Reconciliation of Expected to Actual Income Tax Expense

 

 

2016

 

2017

 

 

€ million

%

 

€ million

%

2016 figures restated

Expected income tax expense and expected tax rate

 

1,152

24.1

 

1,083

23.7

 

 

 

 

 

 

 

Reduction in taxes due to tax-free income

 

 

 

 

 

 

Income related to the operating business

 

(127)

(2.6)

 

(135)

(3.0)

Income from affiliated companies and divestment proceeds

 

(1)

 

(16)

(0.3)

 

 

 

 

 

 

 

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

 

(17)

(0.4)

 

(31)

(0.7)

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

 

(2)

 

(4)

(0.1)

 

 

 

 

 

 

 

Increase in taxes due to non-tax-deductible expenses

 

 

 

 

 

 

Expenses related to the operating business

 

142

3.0

 

168

3.7

Impairment losses on investments in affiliated companies

 

2

 

 

 

 

 

 

 

 

New tax loss and interest carryforwards unlikely to be usable

 

43

0.9

 

69

1.5

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

 

6

0.1

 

1

 

 

 

 

 

 

 

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

 

(76)

(1.6)

 

(128)

(2.8)

Tax effects of changes in tax rates

 

(5)

(0.1)

 

384

8.4

Other tax effects

 

(100)

(2.1)

 

(62)

(1.4)

 

 

 

 

 

 

 

Actual income tax expense and effective tax rate

 

1,017

21.3

 

1,329

29.0

The reported tax expense contains a one-time effect in the amount of €455 million that results solely from the U.S. tax reform passed on December 22, 2017, which provides for a reduction in the corporate tax rate from 35% to 21% from January 1, 2018, leading to a remeasurement of all deferred tax assets and liabilities associated with U.S. companies. This resulted in deferred tax expense of €409 million for 2017 due to changes in tax rates. The additional tax on nonrepatriated profits, which previously had not been taxed in the United States, led to prior-period tax expenses of €46 million.

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