Siemens 2006 Annual Report Download - page 177

Notes to Consolidated Financial Statements
(in millions of €, except where otherwise stated and per share amounts) 173
For the fiscal years ended September 30, 2006 and 2005, the Company was subject to Ger-
man federal corporation tax at a base rate of 25% plus solidarity surcharge of 5.5% on federal
corporation taxes payable. As a result, the statutory rates for the years ended September 30,
2006 and 2005 consist of the federal corporate tax rate, including solidarity surcharge, of
26.4%, and trade tax net of federal benefit of 12.6%, for a combined rate of 39%.
Income tax expense, net in fiscal 2006 includes €(73) related to income tax charges recog-
nized in connection with the internal investigation launched in November 2006 (see Notes 2
and 33).
Income tax expense differs from the amounts computed by applying statutory German
income tax rates (39% for each of the fiscal years ended September 30, 2006 and 2005) as
follows:
Notes to Consolidated Financial Statements
Year ended
September 30,
2006 2005
Expected income tax expense 1,705 1,632
Increase (decrease) in income taxes resulting from:
Non-deductible losses and expenses 181 116
Goodwill and acquired in-process research and development* – (139)
Tax-free income (94) (77)
Tax-free gains and non-deductible losses from sales of business interests (237) (34)
Taxes for prior years (51) –
Movement in valuation allowance 70 (8)
Foreign tax rate differential (406) (448)
Tax effect of equity method investments (133) (121)
Other 43 58
Actual income tax expense 1,078 979
* Fiscal 2005 includes €(233) in tax benefits related to previously unrecognized tax deductions arising from a partial
reorganization of certain businesses for which related goodwill was written off in previous periods.