Mercedes 2004 Annual Report Download - page 131

In 2003, MTU Friedrichshafen GmbH, a fully consolidated compa-
ny of the Group, created a new company, MTU CFC Solutions
GmbH (“MTU CFC”), and contributed all of its fuel cell activities
into a new company for 100% ownership interest. Also in 2003,
MTU CFC issued new shares to RWE Fuel Cells GmbH for a capi-
tal contribution. MTU Friedrichshafen GmbH did not participate
in this increase in share capital causing the ownership interest of
MTU Friedrichshafen GmbH in MTU CFC to dilute to 74.9%. As a
result of this transaction, DaimlerChrysler realized a gain of €24
million, which is included in “gain (loss) from the dilution of
shares in affiliated companies and investments accounted for
under the equity method.”
The Group capitalized interest expenses related to qualifying con-
struction projects of €70 million (2003: €100 million; 2002: €147
million).
9. Income Taxes
Income before income taxes consists of the following:
The income (loss) in Germany includes the income (loss) from
companies included at equity if the shares of those companies
are held by German companies. In 2003, the write-down of the
investment in EADS of €1,960 million is also included.
Income tax expense is comprised of the following components:
For German companies, the deferred taxes at December 31,
2004 were calculated using a federal corporate tax rate of 25%
(2003: 25%; 2002: 26.5% for deferred taxes expected to reverse
in 2003 and 25% for deferred taxes expected to reverse after
2003). Deferred taxes were also calculated with a solidarity sur-
charge of 5.5% for each year on federal corporate taxes plus the
after federal tax benefit rate for trade tax of 12.125% (2003:
12.125%; 2002: 11.842% for deferred taxes expected to reverse in
2003 and 12.125% for deferred taxes expected to reverse after
2003). Including the impact of the surcharge and the trade tax,
the tax rate applied to German deferred taxes amounted to
38.5% (2003: 38.5%; 2002: 39.8% for deferred taxes expected to
reverse in 2003 and 38.5% for deferred taxes expected to reverse
after 2003).
In 2003, the German government enacted new tax legislation
which, among other changes, provides that, beginning January 1,
2004, 5% of dividends received from German companies and
5% from certain gains from the sale of shares in affiliated and
unaffiliated companies are no longer tax-free while losses
from the sale of shares in affiliated and unaffiliated companies
continue to be non-deductible. The change in tax legislation
resulted in a deferred tax expense due to the deferred tax liabili-
ties on the unrealized gains. The effect of the increase in the
deferred tax liabilities of the Group’s German companies was
recognized in the year of enactment and as a result, a deferred
tax expense of €64 million was included in the consolidated
statement of income (loss) in 2003.
In 2002, the German government enacted new tax legislation for
the purpose of financing the flood disaster which, among other
changes, increased the Group’s statutory corporate tax rate for
German companies from 25% to 26.5%, effective only for the
calendar year 2003. The effect of the increase in the tax rate on
the deferred tax assets and liabilities of the Group’s German
companies was recognized in the year of enactment and as a
result, a net charge of €3 million was included in the consolidated
statement of income (loss) in 2002.
The effect of the tax law changes in Germany in 2003 and 2002
are reflected separately in the reconciliations presented below.
A reconciliation of expected income tax expense to actual income
tax expense determined using the applicable German corporate
tax rate for the calendar year of 25% (2003: 26.5%; 2002: 25%) plus
a solidarity surcharge of 5.5% on federal corporate taxes payable
plus the after federal tax benefit rate for trade taxes of 12.125%
(2003: 11.842%; 2002: 12.125%) for a combined statutory rate of
38.5% in 2004 (2003: 39.8%; 2002: 38.5%) is as follows:
127
(in millions of €)
4,205
1,720
5,925
2002
(736)
1,332
596
448
3,087
3,535
20032004
Germany
Non-German countries
Year ended December 31,
(in millions of €)
2002
766
(432)
172
473
979
847
923
(502)
(91)
1,177
20032004
1,141
(286)
(441)
701
1,115
Current taxes
Germany
Non-German countries
Deferred taxes
Germany
Non-German countries
Year ended December 31, (in millions of €)
2002
2004 2003
1,361
(357)
–
(43)
–
291
(88)
–
–
13
1,177
237
(489)
–
(37)
780
159
269
64
–
(4)
979
2,281
(247)
(1,012)
(34)
–
1
178
3
(57)
2
1,115
Expected expense for income taxes
Foreign tax rate differential
Gains from sales of business interests
(T-Systems ITS, TEMIC)
Trade tax rate differential
Non-deductible impairment of investment
in EADS
Tax effect of equity method investments
Tax free income and non-deductible expenses
Effect of changes in German tax laws
Dividend distribution credit at DCAG
Other
Actual expense for income taxes
Year ended December 31,