Siemens 2010 Annual Report Download - page 238

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis

a result of allowances and write offs of finance receivables, net
of reversals of €() and €(), respectively. It also includes
gains and losses related to derivative financial instruments.
 – Income taxes
Income (loss) from continuing operations before income taxes
is attributable to the following geographic regions:
Year ended September ,
 
Germany 1,891 1,525
Foreign 3,920 2,366
5,811 3,891
Income tax expense (benefit) consists of the following:
Year ended September ,
 
Current tax:
German corporation and trade taxes 31 269
Foreign income taxes 1,564 1,209
1,595 1,478
Deferred tax:
Germany 445 1
Foreign (341) (45)
104 (44)
Income tax expense 1,699 1,434
The current income tax expense in fiscal  and  in-
cludes adjustments recognized for current tax of prior years in
the amount of €() and €(), respectively. The reduction of
the German current tax expense in fiscal  is affected by
the release of tax liabilities after the positive decision on ap-
peal with respect to the deductibility of certain expenses as-
sociated with certain foreign dividends.
The deferred tax expense (benefit) in fiscal  and  in-
cludes tax effects of the origination and reversal of temporary
differences of €() and €().
In Germany, the calculation of current tax is based on a corpo-
rate tax rate of  percent and a solidarity surcharge thereon of
. percent, for all distributed and retained earnings. In addi-
tion to corporate taxation, trade tax is levied on profits earned
in Germany. Since trade tax is a non deductible expense the
average trade tax rate is  percent, resulting in a combined
total tax rate of  percent. Deferred tax assets and liabilities
are measured at tax rates that are expected to apply to the
period when the asset is realized or the liability is settled.
For foreign subsidiaries, current taxes are calculated based on
the local tax laws and applicable tax rates in the individual
foreign countries. Deferred tax assets and liabilities are mea-
sured at the tax rates that are expected to apply to the period
when the asset is realized or the liability is settled.
Income tax expense differs from the amounts computed by
applying a combined statutory German income tax rate of
 percent as follows:
Year ended September ,
 
Expected income tax expense 1,801 1,206
Increase (decrease) in
income taxes resulting from:
Non-deductible losses and expenses 691 715
Tax-free income (305) (421)
Taxes for prior years (256) (76)
Change in realizability of
deferred tax assets and tax credits (37) 25
Change in tax rates 11 (17)
Foreign tax rate differential (213) (116)
Tax effect of investments
accounted for using the equity method 2 121
Other, net 5 (3)
Actual income tax expense 1,699 1,434
The income tax resulting from non-tax deductible losses and
expenses in fiscal  is mainly attributable to the goodwill
impairment of the Diagnostics Division of Healthcare, which is
only partly tax-deductible; in fiscal , to the impairment of
NSN.