10 Income tax income/expense

The statutory corporation tax rate in Germany for the 2019 assessment period was 15%. Including trade tax and the solidarity surcharge, this resulted in an aggregate tax rate of 29.8% (previous year: 29.9%).

A tax rate of 29.8% (previous year: 29.8%) was used to measure deferred taxes in the German consolidated tax group.

The local income tax rates applied for companies outside Germany vary between 0% and 45%. In the case of split tax rates, the tax rate applicable to undistributed profits is applied.

The realization of tax benefits from tax loss carryforwards from previous years resulted in a reduction in current income taxes in 2019 of €692 million (previous year: €732 million).

The tax loss carryforwards and the expiry of loss carryforwards that could not be used changed as follows:

The benefit arising from previously unrecognized tax losses or tax credits of a prior period that is used to reduce current tax expense in the current fiscal year amounts to €36 million (previous year: €94 million). Deferred tax expense was reduced by €66 million (previous year: €116 million) because of a benefit arising from previously unrecognized tax losses and tax credits of a prior period. Deferred tax expense resulting from the write-down of a deferred tax asset amounts to €58 million (previous year: €95 million). Deferred tax income resulting from the reversal of a write-down of deferred tax assets amounts to €35 million (previous year: €231 million).

Tax credits granted by various countries amounted to €378 million (previous year: €385 million).

No deferred tax assets were recognized for deductible temporary differences of €897 million (previous year: €1,123 million) and for tax credits of €138 million (previous year: €123 million) that would expire in the next 20 years, or for tax credits of €0 million (previous year: €3 million) that will not expire.

In accordance with IAS 12.39, deferred tax liabilities of €231 million (previous year: €213 million) for temporary differences and undistributed profits of Volkswagen AG subsidiaries were not recognized because control exists.

Deferred tax expense resulting from changes in tax rates amounted to €116 million at Group level (previous year: €79 million).

Deferred taxes in respect of temporary differences and tax loss carryforwards of €1,006 million (previous year: €8,235 million) were recognized without being offset by deferred tax liabilities in the same amount. In fiscal year 2018, the deferred tax assets of companies within the German tax group were recognized due to positive results in the past and were included in this analysis. The companies concerned are expecting positive tax income in the future, following losses in the reporting period or the previous year.

€7,820 million (previous year: €4,532 million) of the deferred taxes recognized in the balance sheet was credited to equity and relates to other comprehensive income. €53 million (previous year: €2 million) of this figure is attributable to noncontrolling interests. There were effects from capital transactions with noncontrolling interest shareholders in the reporting period. In fiscal years 2019 and 2018, there were only immaterial changes arising from items that will not be reclassified to profit or loss and were recognized directly in equity. The first-time application of IFRS 9 in the year 2018 resulted in adjustments and reclassifications totaling €33 million, which were accounted for as a deduction from equity. Changes in deferred taxes classified by balance sheet item are presented in the statement of comprehensive income.

In fiscal year 2018, tax effects of €6 million resulting from equity transaction costs were recognized in equity. The calling of the first tranche of the hybrid capital issued in September 2013 resulted in a reduction of equity in the amount of €5 million in the year 2018.

DEFERRED TAXES CLASSIFIED BY BALANCE SHEET ITEM

The following recognized deferred tax assets and liabilities were attributable to recognition and measurement differences in the individual balance sheet items and to tax loss carryforwards:

In accordance with IAS 12, deferred tax assets and liabilities are offset if, and only if, they relate to income taxes levied by the same taxation authority and relate to the same tax period.

The tax expense reported for 2019 of €4,326 million (previous year: €3,489 million) was €1,144 million lower (previous year: €1,188 million) than the expected tax expense of €5,470 million that would have resulted from application of a tax rate for the Group of 29.8% (previous year: 29.9%) to the earnings before tax of the Group.