BMW 2003 Annual Report Download - page 83

The tax expense/benefits for prior years include
in 2002 a corporation tax reduction of euro 50 million
relating to the dividend payments of BMW AG. In
the year under report, there was no similar reduction.
As a consequence of the Tax Preference Reduction
Act enacted on 16 May 2003, the claims for the cor-
poration tax reduction on the payment of dividends
by BMW AG in 2003 were suspended. Other vari-
ances include a reversal of the valuation allowance
(euro 40 million) on deferred tax assets relating to
tax losses available for carry forward in the United
Kingdom.
001 BMW Group in figures
004 Report of the Supervisory Board
008 Supervisory Board
011 Board of Management
012 Group Management Report
12 A Review of the Financial Year
29 Outlook
30 Financial Analysis
44 Risk Management
047 BMW Stock
050 Corporate Governance
054 Group Financial Statements
118 BMW AG Principal Subsidiaries
120 BMW Group10-year Comparison
122 BMW Group Locations
124 Glossary, Index
82
Deferred tax assets on tax loss carryforwards
decreased by euro 439 million compared to the
previous year. This was due to the further utilisation
of tax losses, in particular by BMW AG. A valuation
allowance is recognised on deferred tax assets when
recoverability is uncertain. In determining the level
of the valuation allowance, all positive and negative
factors concerning the likely existence of sufficient
taxable profits in the future are taken into
account.
These estimates can change depending on the
actual course of events. The valuation allowance in-
cludes euro 226 million (2002: euro 293 million)
on
tax loss carryforwards and euro 440 million (2002:
euro 489 million) on losses on disposals (so called
“capital losses”) in the United Kingdom, which can
only be offset against capital gains, but not against
operating profits. In addition, there is a valuation
allowance of euro 435 million (2002: euro 523 mil-
lion) on deferred tax assets relating to capital
allowances in the United Kingdom which is shown
above in intangible assets and property, plant and
equipment. The valuation allowance decreased
in total by euro 204 million. This includes euro
129 million resulting from the translation of foreign
currency financial statements and which are recog-
nised directly in equity, the deferred tax expense
being therefore only reduced by euro 75 million.
Equity is reduced at the balance sheet date by
deferred tax liabilities of euro 474 million (2002: euro
1,042 million) recognised directly in equity. As in
the previous year, this was the result of the positive
market value changes of interest and currency de-
rivatives recognised directly in equity.
The actual tax expense for the financial year
2003 of euro1,258 million (2002: euro 1,277 million)
is euro 31 million lower (2002: euro 6 million) than
the expected tax expense of euro 1,289 million
(2002: euro 1,283 million) which would theoretically
arise if the tax rate of 40.21% (2001: 38.9%), appli-
cable for German companies, was applied across
the Group. The difference between the expected
and actual tax expense is attributable to the following:
in euro million 2003 2002
Expected tax expense 1,289 1,283
Variances due to different tax rates – 101 –98
Ta x reductions (–)/tax increases (+) as a result of non-taxable income and
non-deductible expenses 36 65
Ta x expense (+)/benefits (–) for prior periods 102 32
Other variances –68 –5
Actual tax expense 1,258 1,277