Taxes

The breakdown of tax expense by origin was as follows:

Tax Expense by Origin

 

 

2015

 

2016

 

 

 

Of which income taxes

 

 

Of which income taxes

 

 

€ million

€ million

 

€ million

€ million

2015 figures restated

Taxes paid or accrued

 

 

 

 

 

 

Current income taxes

 

 

 

 

 

 

Germany

 

(1,140)

 

 

(934)

 

Other countries

 

(1,114)

 

 

(991)

 

Other taxes

 

 

 

 

 

 

Germany

 

(44)

 

 

(86)

 

Other countries

 

(221)

 

 

(204)

 

 

 

(2,519)

(2,254)

 

(2,215)

(1,925)

Deferred taxes

 

 

 

 

 

 

from temporary differences

 

1,056

 

 

577

 

from tax loss carryforwards and tax credits

 

(25)

 

 

19

 

 

 

1,031

1,031

 

596

596

Total

 

(1,488)

(1,223)

 

(1,619)

(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, 2015

 

Dec. 31, 2016

 

 

Deferred tax assets

Deferred tax liabilities

 

Deferred tax assets

Deferred tax liabilities

 

 

€ million

€ million

 

€ million

€ million

Intangible assets

 

1,411

1,910

 

1,478

1,766

Property, plant and equipment

 

253

678

 

264

692

Financial assets

 

18

183

 

240

224

Inventories

 

943

63

 

1,267

32

Receivables

 

98

580

 

71

547

Other assets

 

28

14

 

39

13

Provisions for pensions and other post-employment benefits

 

3,601

1,213

 

3,637

983

Other provisions

 

1,025

90

 

1,083

112

Liabilities

 

714

91

 

793

133

Tax loss and interest carryforwards

 

393

 

473

Tax credits

 

191

 

177

 

 

8,675

4,822

 

9,522

4,502

of which noncurrent

 

7,398

4,750

 

7,868

3,662

Set-off

 

(3,996)

(3,996)

 

(3,172)

(3,172)

Total

 

4,679

826

 

6,350

1,330

Deferred taxes on remeasurements, recognized outside profit or loss, of the net liability for defined benefit pension and other post-employment benefits increased equity by €228 million (2015: diminished equity by €430 million). Deferred taxes on changes, recognized outside profit or loss, in fair values of available-for-sale financial assets and derivatives designated as cash flow hedges diminished equity by €24 million (2015: diminished equity by €27 million). These effects on equity are reported in the statement of comprehensive income.

The use of tax loss carryforwards reduced current income taxes in 2016 by €152 million (2015: €136 million). The use of tax credits reduced current income taxes by €18 million (2015: €21 million).

Of the total tax loss and interest carryforwards of €5,447 million, including interest carryforwards of €118 million (2015: €5,497 million, including interest carryforwards of €72 million), an amount of €2,269 million, including interest carryforwards of €0 million (2015: €1,812 million, including interest carryforwards of €0 million) is expected to be usable within a reasonable period. The decrease in tax loss and interest carryforwards was mainly due to the favorable overall business development. Deferred tax assets of €473 million (2015: €393 million) were recognized for the amount of tax loss and interest carryforwards expected to be usable.

The use of €3,178 million of tax loss and interest carryforwards, including interest carryforwards of €118 million (2015: €3,685 million, including interest carryforwards of €72 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 €294 million (2015: €322 million) would have been recognized.

Tax credits of €177 million were recognized in 2016 (2015: €191 million) as deferred tax assets. The use of €38 million (2015: €41 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 Carryforwards and Interest Carryforwards

 

 

Tax credits

 

Tax loss and interest carryforwards

 

 

Dec. 31, 2015

Dec. 31, 2016

 

Dec. 31, 2015

Dec. 31, 2016

 

 

€ million

€ million

 

€ million

€ million

Within one year

 

4

4

 

17

4

Within two years

 

 

70

1

Within three years

 

4

4

 

25

31

Within four years

 

 

32

132

Within five years

 

26

29

 

234

31

Thereafter

 

6

 

3,307

2,979

Total

 

40

37

 

3,685

3,178

In 2016, subsidiaries that reported losses for 2016 or 2015 recognized net deferred tax assets totaling €2,575 million (2015: €2,455 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 €41 million were recognized in 2016 (2015: €35 million) for planned dividend payments by subsidiaries. Deferred tax liabilities were not recognized for temporary differences on €20,069 million (2015: €12,087 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 2016 (2015: €1,223 million) differed by €128 million (2015: €119 million) from the expected tax expense of €1,457 million (2015: €1,342 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 24.7% in 2016 (2015: 25.6%). The effective tax rate was 22.6% (2015: 23.4%).

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, Technology Services and Currenta. It also includes “Corporate Functions and Consolidation,” which largely comprises Bayer holding companies and 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

 

 

2015

 

2016

 

 

€ million

%

 

€ million

%

2015 figures restated

Expected income tax expense and expected tax rate

 

1,342

25.6

 

1,457

24.7

 

 

 

 

 

 

 

Reduction in taxes due to tax-free income

 

 

 

 

 

 

Income related to the operating business

 

(155)

(3.0)

 

(161)

(2.7)

Income from affiliated companies and divestment proceeds

 

(10)

(0.2)

 

(2)

 

 

 

 

 

 

 

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

 

(30)

(0.6)

 

(27)

(0.5)

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

 

(6)

(0.1)

 

(19)

(0.3)

 

 

 

 

 

 

 

Increase in taxes due to non-tax-deductible expenses

 

 

 

 

 

 

Expenses related to the operating business

 

148

2.8

 

153

2.6

Impairment losses on investments in affiliated companies

 

7

0.1

 

2

 

 

 

 

 

 

 

New tax loss and interest carryforwards unlikely to be usable

 

81

1.5

 

45

0.8

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

 

16

0.3

 

6

0.1

 

 

 

 

 

 

 

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

 

(95)

(1.8)

 

(80)

(1.4)

Tax effects of changes in tax rates

 

(25)

(0.5)

 

(4)

(0.1)

Other tax effects

 

(50)

(0.7)

 

(41)

(0.6)

 

 

 

 

 

 

 

Actual income tax expense and effective tax rate

 

1,223

23.4

 

1,329

22.6