Siemens 2007 Annual Report Download - page 235

Notes to Consolidated Financial Statements 235
(in millions of €, except where otherwise stated and per share amounts)
Notes to Consolidated Financial Statements
For fi scal years ended September 30, 2007 and 2006, the Company was subject
to German federal corporation income tax at a base rate of 25% plus solidarity
surcharge of 5.5% thereon. As a result, the statutory tax rate for the years ended
September 30, 2007 and 2006 consists of the federal corporation income tax rate,
including solidarity surcharge, of 26.4%, and trade tax net of federal benefi t of
12.6%, for an overall combined rate of 39%.
The combined tax rate will be reduced due to the German Tax Reform 2008
from 39% to 31% beginning fi scal year 2008. The change in tax rate is affected
mainly by the reduction of the German federal corporation tax rate from 25% to
15%. The reduction of the combined tax rate was taken into account for the calcu-
lation of the deferred tax assets and liabilities of the German Companies. The
effect amounts to €315 deferred tax expense.
Income tax expense differs from the amounts computed by applying statutory
German income tax rates (39% for fi scal years ended September 30, 2007 and
2006) as follows:
The tax effect of non-deductible loses and expenses in 2007 has been increased
mainly by cartel penalties.
The taxes for prior years in 2007 include a deferred tax benefi t of €378 from
previously unrecognized tax loss carryforwards as well as other changes in
reserves.
Year ended
September 30,
2007 2006
Expected income tax expense 1,989 1,333
Increase (decrease) in income taxes resulting from:
Non-deductible losses and expenses 545 217
Goodwill (34) (21)
Tax-free income (552) (475)
Taxes for prior years (572) (112)
Change in judgment of realizability of deferred tax assets (147) 123
Change in tax rate effect 323 4
Foreign tax rate differential (310) (120)
Tax effect of investments accounted
for using the equity method (40) (160)
Other, net (10) (13)
Actual income tax expense* 1,192 776
* For information regarding the adjustment of fi scal 2006 for the correction of income tax related misstatements,
please refer to Note 2