BMW 2007 Annual Report Download - page 95

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amounting to euro 628 million at the end of the year
(2006: euro 463 million) were fully written down
since they can only be utilised against future capital
gains. Capital losses are not connected to ongoing
business operations.
Deferred taxes recognised directly in equity
amounted to euro 116 million (2006: euro 512 mil-
lion). The decrease was due mainly to actuarial gains
and losses (net) arising in conjunction with pension
obligations and recognised directly in equity. The
level of actuarial gains and losses in 2007 was af-
fected in particular by the increase in the discount
factors applied.
Deferred taxes are not recognised on retained
profits of euro 13,925 million (2006: euro 13,866 mil-
lion) of foreign subsidiaries, as it is intended to invest
these profits to maintain and expand the business
volume of the relevant companies. A computation
was not made of the potential impact of income taxes
on the grounds of disproportionate expense.
The tax returns of BMW Group entities are
checked regularly by German and foreign tax author-
ities. Taking account of a variety of factors – including
existing interpretations, commentaries and legal de-
cisions taken relating to the various tax jurisdictions
and the BMW Group’s past experience – adequate
provision has, as far as identifiable, been made for
potential future tax obligations.
The actual tax expense for the financial year 2007
of euro 739 million (2006: euro 1,250 million) is euro
767 million (2006: euro 354 million) lower than the
expected tax expense of euro 1,506 million (2006:
euro 1,604 million) which would theoretically arise if
the tax rate of 38.9 % (unchanged from the previous
year), applicable for German companies, was applied
across the Group. The difference between the ex-
pected and actual tax expense is attributable to the
following:
in euro million 2007 2006
Expected tax expense 1,506 1,604
Variances due to different tax rates – 731 – 213
Tax reductions (–)/tax increases (+) as a result of non-taxable income and
non-deductible expenses 4 – 68
Tax expense (+)/benefits (–) for prior periods – 4 – 94
Other variances – 36 21
Actual tax expense 739 1,250
The sharp decrease in the effective tax rate was
mainly caused by the significant increase in variances
due to different tax rates. This includes the one-off
impact of the remeasurement of deferred tax assets
and liabilities at 31 December 2007. The total posi-
tive impact for the BMW Group was euro 491 million,
most of which was due to the application of the tax
rate of 30.2 % (valid from 1 January 2008) for German
entities.