Annual Report 2013

Notes to the consolidated statement of income

(30) Taxes on income

Income tax expense/income breaks down as follows:

Income before taxes on income and analysis of taxes
in million euros 20121 2013
Income before tax 2,018 2,172
Current taxes 532 571
Deferred taxes –40 –24
Taxes on income 492 547
Tax rate in percent 24.4 % 25.2 %

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Main components of tax expense and income
in million euros 20121 2013
Current tax expense/income in the reporting year 534 609
Current tax adjustments for prior years –2 –38
Deferred tax expense/income from temporary differences –50 –31
Deferred tax expense from unused tax losses 24
Deferred tax expense from tax credits 1
Deferred tax expense/income from changes in tax rates –3 –3
Increase/decrease in valuation allowances on deferred tax assets –2 10
Tax income from application of IAS 19 revised –10

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Deferred tax expense by items on the statement of financial position
in million euros 20121 2013
Intangible assets –52 –6
Property, plant and equipment 3 –12
Financial assets 5 –1
Inventories 3 –1
Other receivables and other assets –8 –28
Special tax item –3 –3
Provisions –36 4
Liabilities 25 13
Tax credits 1
Unused tax losses 24
Valuation allowances –2 10
Financial statement figures –40 –24

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We have summarized the individual company reports – prepared on the basis of the tax rates applicable in each country and taking into account consolidation procedures – in the statement below, showing how the expected tax charge, based on the tax rate applicable to Henkel AG & Co. KGaAKGaA
Abbreviation for “Kommanditgesellschaft auf Aktien.” A KGaA is a company with a legal identity (legal entity) in which at least one partner has unlimited liability with respect to the company’s creditors (personally liable partner), while the liability for such debts of the other partners participating in the share-based capital stock is limited to their share capital (limited shareholders).
of 31 percent, is reconciled to the effective tax charge disclosed.

Tax reconciliation statement
in million euros 20121 2013
Income before taxes on income 2,018 2,172
Tax rate (including trade tax) of Henkel AG & Co. KGaA 31 % 31 %
Expected tax charge 626 673
Tax reductions due to differing tax rates abroad –75 –86
Tax increases/reductions for prior years 8 –32
Tax increases/reductions due to changes in tax rates –3 –3
Tax increases/reductions due to the recognition of deferred tax assets relating to unused tax losses and temporary differences –2 10
Tax reductions due to tax-free income and other items –159 –107
Tax increases/reductions arising from additions and shortfalls for local taxes 18 18
Tax increases due to withholding taxes 27 22
Tax increases due to non-deductible expenses 52 52
Tax charge disclosed 492 547
Tax rate 24.4 % 25.2 %

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Deferred taxesDeferred taxes
In accordance with International Accounting Standard (IAS) 12, deferred taxes are recognized with respect to temporary differences between the statement of financial position valuation of an asset or a liability and its tax base, unused tax losses and tax credits.
are calculated on the basis of tax rates that apply in the individual countries at the year-end date or which have already been legally decided. In Germany there is a uniform corporate income tax rate of 15 percent plus a solidarity tax of 5.5 percent. After taking into account trade tax, this yields an overall tax rate of 31 percent.

Deferred tax assets and liabilities are netted where they involve the same tax authority and the same tax creditor.

The deferred tax assets and liabilities stated on the reporting date relate to the following items of the consolidated statement of financial position, unused tax losses and tax credits:

Allocation of deferred taxes
  Deferred tax assets Deferred tax liabilities
in million euros December 31, 2012 December 31, 2013 December 31, 2012 December 31, 2013
Intangible assets 162 193 669 661
Property, plant and equipment 18 15 90 73
Financial assets 6 10 14 18
Inventories 36 35 6 7
Other receivables and other assets 59 48 97 59
Special tax items 43 40
Provisions 679 636 10 12
Liabilities 109 77 17 9
Tax credits 8 8
Unused tax losses 27 29
Amounts netted –497 –422 –497 –422
Valuation allowances –15 –23
Financial statement figures 592 606 449 457

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The deferred tax assets of 636 million euros (previous year: 679 million euros) relating to provisions in the financial statement result primarily from recognition and measurement differences with respect to pensions. The deferred tax liabilities of 661 million euros (previous year: 669 million euros) relating to intangible assets are mainly attributable to business combinations such as the acquisition of the National Starch businesses in 2008.

An excess of deferred tax assets is only recognized insofar as it is likely that the company concerned will achieve sufficiently positive taxable profits in the future against which the deductible temporary differences can be offset and tax loss carry-forwards can be used. Deferred taxesDeferred taxes
In accordance with International Accounting Standard (IAS) 12, deferred taxes are recognized with respect to temporary differences between the statement of financial position valuation of an asset or a liability and its tax base, unused tax losses and tax credits.
have not been recognized with respect to unused tax losses of 93 million euros (previous year: 52 million euros), as it is not sufficiently probable that taxable gains or benefits will be available against which they may be utilized. Of these tax losses carried forward, 75 million euros (previous year: 24 million euros) expire after more than three years. State taxes relating to our US-American subsidiary account for 42 million euros (previous year: 0 million euros) of these unused tax losses (tax rate: around 5 percent). Of the tax losses carried forward, 18 million euros are non-expiring (previous year: 25 million euros).

Deferred tax liabilities of 12 million euros (previous year: 5 million euros) relating to the retained earnings of foreign subsidiaries have been recognized due to the fact that these earnings will be distributed in 2014.

We have summarized the expiry dates of unused tax losses and tax credits in the table below, which includes unused tax losses arising from losses on the disposal of assets of 9 million euros (previous year: 11 million euros) which may be carried forward without restriction.

Expiry dates of unused tax losses and tax credits
  Unused tax losses Tax credits
in million euros December 31, 2012 December 31, 2013 December 31, 2012 December 31, 2013
Expire within        
1 year 4 4
2 years 3
3 years
more than 3 years 140 144 8 8
May be carried forward without restriction 61 52
Total 208 200 8 8

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In many countries, different tax rates apply to losses on the disposal of assets and to operating profits, and in some cases losses on the disposal of assets may only be offset against gains on the disposal of assets.

Of unused tax losses expiring beyond three years, 93 million euros (previous year: 104 million euros) relate to loss carryforwards of US subsidiaries with respect to state taxes.

Equity-decreasing deferred taxesdeferred taxes
In accordance with International Accounting Standard (IAS) 12, deferred taxes are recognized with respect to temporary differences between the statement of financial position valuation of an asset or a liability and its tax base, unused tax losses and tax credits.
of 36 million euros were recognized (previous year: equity-increasing amount of 114 million euros). Of these deferred tax liabilities, 26 million euros result from actuarial gains and losses on pension obligations, and 10 million euros from gains and losses on cash flowcash flow
Inflows and outflows of cash and cash equivalents divided within the statement of cash flows into cash flows from ordinary activities, from investing and acquisition activities, and from financing activities.
hedges.