Siemens 2014 Annual Report Download - page 270

108 A. To our Shareholders 131 B. Corporate Governance 171 C. Combined Management Report

In Germany, the calculation of current tax is based on a corpo-
rate tax rate of  % and a solidarity surcharge thereon of . %,
for all distributed and retained earnings. In addition to corpo-
rate taxation, trade tax is levied on profits earned in Germany.
As the German trade tax is a non deductible expense, the aver-
age trade tax rate amounts to  % and the combined total tax
rate results in  %. Deferred tax assets and liabilities are mea-
sured 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 for-
eign countries. Deferred tax assets and liabilities are measured
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 (current and deferred) differs from the
amounts computed by applying a combined statutory German
income tax rate of  % as follows:
Year ended September ,
(in millions of €)  
Expected income tax expenses 2,302 1,802
Increase (decrease) in income taxes resulting
from:
Non-deductible losses and expenses 282 377
Tax-free income (236) (343)
Taxes for prior years 78 56
Change in realizability of deferred tax assets
and tax credits 11 21
Change in tax rates (1) (31)
Foreign tax rate differential (244) (175)
Tax effect of investments accounted
for using the equity method (163) (74)
Other, net (1) 1
Actual income tax expenses 2,028 1,634
The tax free income in fiscal  is impacted by several Port-
folio activities, whereas  is amongst others attributable to
the NSN disposal.
Deferred income tax assets and liabilities on a gross basis are
summarized as follows:
September ,
(in millions of €)  
Assets:
Non-current assets 433 547
Inventories and receivables 1,445 1,240
Post-employment benefits 3,112 2,954
Liabilities 3,991 3,699
Other 229 282
Tax loss and credit carryforward 706 918
Deferred tax assets 9,915 9,640
Liabilities:
Non-current assets 2,185 2,452
Inventories and receivables 3,882 3,476
Liabilities 787 670
Other 280 312
Deferred tax liabilities 7,133 6,910
Total deferred tax assets, net 2,782 2,730
In assessing the realizability of deferred tax assets, manage-
ment considers the extent to which it is probable that the
deferred tax asset will be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future
taxable profits during the periods in which those temporary
differences and tax loss carryforwards become deductible.
Management considers the expected reversal of deferred tax
liabilities and projected future taxable income in making this
assessment. Based upon the level of historical taxable income
and projections for future taxable income over the periods in
which the deferred tax assets are deductible, management
believes it is probable the Company will realize the benefits
of these deductible differences. As of September , ,
the Company has certain tax losses subject to significant lim-
itations. For those losses deferred tax assets are not recog-
nized, as it is not probable that gains will be generated to offset
those losses.
As of September ,  and , the Company had
€ , mil lion and € , million, respectively of gross tax loss
carryforwards. The Company assumes that future operations
will generate sufficient taxable income to realize the deferred
tax assets.