Taxes on income in The Linde Group can be analysed as follows:
|
Taxes on income |
|
|
|
|
|
in € million |
|
2006 |
|
Adjusted |
|
Current tax expense and income |
|
163 |
|
243 |
|
Tax expense and income relating to prior periods |
|
33 |
|
6 |
|
Deferred tax income and deferred tax expense |
|
–52 |
|
–17 |
|
Taxes on income |
|
144 |
|
232 |
|
Discontinued operations |
|
525 |
|
53 |
|
|
|
669 |
|
285 |
The income tax expense disclosed for the 2006 financial year of €669 million is €291 million lower than the expected income tax expense of €960 million, a theoretical figure arrived at by applying the German tax rate of 37.9 percent (2005: 37.9 percent) to Group earnings before taxes on income. Tax effects directly recognised in equity are shown in detail in Note [27].
The difference between the expected income tax expense and the figure disclosed is explained below:
|
in € million |
|
2006 |
|
Adjusted |
|
Earnings before taxes on income |
|
2,527 |
|
808 |
|
Income tax rate of Linde AG (including trade tax) |
|
38 % |
|
38 % |
|
Expected income tax expense |
|
960 |
|
307 |
|
Foreign tax rate differential |
|
–51 |
|
–61 |
|
Reduction in tax due to tax-free income |
|
–489 |
|
–11 |
|
Increase in tax due to non-tax-deductible expenses |
|
71 |
|
39 |
|
Tax expense and income relating to prior periods |
|
33 |
|
6 |
|
Effect of changes in tax rate |
|
–2 |
|
–5 |
|
Change in other permanent differences |
|
106 |
|
– |
|
Other |
|
41 |
|
10 |
|
Income tax expense disclosed |
|
669 |
|
285 |
|
Effective tax rate |
|
26 % |
|
35 % |
In the 2006 financial year, the corporation tax rate in Germany was 25 percent (2005: 25 percent). Taking into account an average rate for trade earnings tax of 11.5 percent and the solidarity surcharge rate of 1.4 percent, this gives a tax rate for German companies of 37.9 percent (2005: 37.9 percent).
Income tax rates for Group companies outside Germany vary between 12.5 percent and 40 percent.
No deferred tax is calculated in respect of retained profits in subsidiaries, as the profits are indefinitely reinvested in these operations or are not subject to taxation.
|
Deferred tax assets and liabilities | ||||||||
|
|
|
2006 |
|
Adjusted | ||||
|
in € million |
|
Deferred |
|
Deferred tax liabilities |
|
Deferred |
|
Deferred tax liabilities |
|
Intangible assets and tangible assets |
|
118 |
|
2,099 |
|
91 |
|
485 |
|
Financial assets |
|
99 |
|
260 |
|
17 |
|
128 |
|
Current assets |
|
658 |
|
468 |
|
143 |
|
269 |
|
Provisions |
|
160 |
|
120 |
|
295 |
|
43 |
|
Liabilities |
|
435 |
|
691 |
|
264 |
|
49 |
|
Tax loss carryforwards and tax credits |
|
108 |
|
– |
|
112 |
|
– |
|
Valuation allowance |
|
–15 |
|
– |
|
–75 |
|
– |
|
Amounts offset |
|
–1,323 |
|
–1,323 |
|
–602 |
|
–602 |
|
|
|
240 |
|
2,315 |
|
245 |
|
372 |
The significant increase in deferred tax liabilities is as a result of the purchase price allocation on the acquisition of The BOC Group in 2006, and relates mainly to intangible and tangible assets.
Deferred tax assets in respect of provisions include €30 million (2005: €113 million), which relates to entries recognised directly in equity. The change in the 2006 financial year was €83 million. The carrying amount of deferred tax assets is reduced to the extent that it is no longer probable that the deferred tax asset will be utilised. A valuation allowance of €15 million (2005: €75 million) has therefore been recognised against the deferred tax assets to reduce the potential tax savings of €43 million (2005: €234 million), as it is not probable that the underlying tax loss carry-forwards and tax credits of €26 million (2005: €209 million) and deductible temporary differences of €17 million (2005: €25 million) will be utilised. Of the total potential tax savings less the valuation allowance of €43 million (2005: €234 million), €9 million (2005: €75 million) may be carried forward for up to ten years and €17 million (2005: €132 million) may be carried forward for longer than ten years.
|
Tax loss carryforwards | ||||
|
in € million |
|
2006 |
|
2005 |
|
May be carried forward for up to 10 years |
|
24 |
|
85 |
|
May be carried forward for longer than 10 years |
|
81 |
|
49 |
|
May be carried forward indefinitely |
|
82 |
|
222 |
|
|
|
187 |
|
356 |
Although some of the unused tax losses were utilised during the year, the reduction in tax loss carryforwards is due mainly to the disposal of unused tax losses on the sale of the KION Group, which was not compensated for by the addition of tax loss carryforwards relating to The BOC Group.