11.Taxes
The breakdown of tax expenses by type is shown in the table below:
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|
|
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|
2018 |
2019 |
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|
€ million |
€ million |
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Current taxes |
(696) |
(126) |
||
of which tax expense current year |
(677) |
(174) |
||
of which tax expense prior years |
(19) |
48 |
||
Deferred taxes |
49 |
(78) |
||
of which from temporary differences |
51 |
(82) |
||
of which from tax loss carryforwards and tax credits |
(2) |
4 |
||
Total |
(647) |
(204) |
The deferred tax assets and liabilities were allocated to the items in the statements of financial position as shown in the table below:
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|
|
|
|
|
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|
Dec. 31, 2018 |
Dec. 31, 2019 |
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|
Deferred tax assets |
Deferred tax liabilities |
of which recognized in profit or loss |
Deferred tax assets |
Deferred tax liabilities |
of which recognized in profit or loss |
|||||||||
|
€ million |
€ million |
€ million |
€ million |
€ million |
€ million |
|||||||||
|
|||||||||||||||
Intangible assets |
49 |
(19) |
30 |
38 |
(15) |
23 |
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Property, plant and equipment1 |
144 |
(194) |
(50) |
129 |
(318) |
(188) |
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Financial assets |
– |
(60) |
(60) |
1 |
(75) |
(73) |
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Inventories |
40 |
(2) |
38 |
42 |
(1) |
41 |
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Receivables |
4 |
(13) |
(9) |
17 |
(5) |
12 |
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Provisions for pensions and other post-employment benefits |
530 |
(27) |
(21) |
632 |
(23) |
(12) |
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Other provisions |
91 |
(21) |
70 |
39 |
(18) |
22 |
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Liabilities1 |
105 |
(2) |
101 |
195 |
(1) |
194 |
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Tax loss carryforwards |
4 |
– |
4 |
8 |
– |
8 |
|||||||||
Total |
967 |
(338) |
103 |
1,101 |
(456) |
25 |
|||||||||
of which noncurrent |
881 |
(301) |
|
1,002 |
(415) |
|
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Offsetting |
(185) |
185 |
|
(250) |
250 |
|
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Recognition |
782 |
(153) |
|
851 |
(206) |
|
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Of the total tax loss carryforwards of €42 million (previous year: €17 million), an amount of €42 million (previous year: €16 million) is expected to be usable within a foreseeable period. The increase in loss carryforwards was mainly due to the growth of tax loss carryforwards in the reporting year and tax reassessments for prior years. Deferred tax assets of €8 million (previous year: €4 million) were recognized for the amount of loss carryforwards expected to be usable.
No use of tax loss carryforwards was subject to legal or economic restrictions with regard to its usability (previous year: €1 million). Consequently, no deferred tax assets were recognized for this amount.
No material tax credits were recorded in either the reporting year or the prior year.
Unusable tax loss carryforwards will expire as shown in the table below:
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|
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|
Tax loss carryforwards |
|||
|
Dec. 31, 2018 |
Dec. 31, 2019 |
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|
€ million |
€ million |
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Within one year |
– |
– |
||
Within two years |
– |
– |
||
Within three years |
– |
– |
||
Within four years |
– |
– |
||
Within five years |
– |
– |
||
Thereafter |
1 |
– |
||
Total |
1 |
– |
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In fiscal 2019, subsidiaries that reported losses for the reporting year or the previous year recognized net deferred tax assets totaling €627 million (previous year: €7 million) from temporary differences and tax loss carryforwards, of which €5 million (previous year: €1 million) were recognized from tax loss carryforwards. These assets were considered to be unimpaired because the companies concerned were expected to generate taxable income in the future.
In the reporting year, deferred tax liabilities of €31 million (previous year: €21 million) were recognized for planned dividend distributions by subsidiaries. No deferred tax liabilities were recognized for temporary differences of €48 million (previous year: €71 million) relating to shares in subsidiaries, as it is unlikely that these temporary differences will reverse in the foreseeable future.
The reported tax expense of €204 million (previous year: €647 million) for fiscal 2019 was €15 million higher (previous year: €56 million) than the expected tax expense of €189 million (previous year: €591 million) that would have resulted from applying an expected weighted average tax rate to the pre-tax income of the Covestro Group. This average tax rate was derived from the expected tax rates of the individual Group companies and amounted to 24.8% in fiscal 2019 (previous year: 23.9%). The effective tax rate was 26.8% (previous year: 26.1%).
The reconciliation of expected to actual income tax expense and of the expected to the effective tax rate for the Covestro Group is shown in the following table:
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|
2018 |
2019 |
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|
€ million |
% |
€ million |
% |
||||
Expected income tax expense and expected tax rate |
591 |
+23.9 |
189 |
+24.8 |
||||
Reduction in taxes due to tax-free income |
(21) |
–0.8 |
(33) |
–4.3 |
||||
Increase in taxes due to non-tax-deductible expenses |
58 |
+2.2 |
47 |
+6.1 |
||||
Tax income (–) and expenses (+) relating to other periods |
– |
– |
(19) |
–2.5 |
||||
Tax effects of change in tax rates |
(1) |
– |
5 |
+0.7 |
||||
Other tax effects |
20 |
+0.8 |
15 |
+2.0 |
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Actual income tax expense and effective tax rate |
647 |
+26.1 |
204 |
+26.8 |
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