Mercedes 1999 Annual Report Download - page 92

NOTES TO THE CONSOLIDATED STATEMENTS OF INCOME
Income (loss) from investments
of which from affiliated companies
€41 (1998: €(20); 1997: €17)
Gains, net from disposals of
investements and shares in affilia-
ted and associated companies
Write-down of investments and shares
in affiliated companies
Income from companies
included at equity
Income (loss) from investments, net
Other interest and similar income
of which from affiliated companies
€17 (1998: €13; 1997: €10)
Interest and similar expenses
Interest income, net
Income from securities and long-term
receivables
Write-down of securities and
long-term receivables
Realized and unrealized gains (losses)
on derivative financial instruments
Other, net
Other financial income (loss), net
1997
Year ended December 31,
19 (111) 66
41 37 459
(19) (55) (76)
23 59 36
64 (70) 485
1,382 1,327 1,320
(729) (702) (640)
653 625 680
913 231 376
(17) (10) (10)
(1,078) 145 (794)
(202) (158) (104)
(384) 208 (532)
333 763 633
19981999
The Group capitalized interest expenses related to qualifying construction
projects of €163 (1998: €186; 1997: €207).
7. FINANCIAL INCOME, NET
Current taxes
Germany
Foreign
Deferred taxes
Germany
Foreign
1997
Year ended December 31,
19981999
1,074 (267) (1,472)
1,538 1,322 1,660
836 967 (910)
1,085 992 205
4,533 3,014 (517)
8. INCOME TAXES
Income before income taxes and extraordinary items amounted to
€9,657 (1998: €8,093; 1997: €6,145), of which €2,688 was gener-
ated by the Group’s operations in Germany (1998: €2,229; 1997:
€1,450).
In 1999, the tax laws in Germany were changed including a reduc-
tion in the retained corporate income tax rate from 45% to 40% and
the broadening of the tax base. The effects of the changes in Ger-
man tax laws were recognized as a charge of €812 (basic: €0.81
per share; diluted: €0.80 per share) in the consolidated statement
of income in 1999. The effects of the reduction in the tax rate on
the deferred tax assets and liabilities of the Group’s German com-
panies as of December 31, 1998 amounted to €290. The broaden-
ing of the tax base resulted in tax expense of €522.
German corporate tax law applies a split-rate imputation with re-
gard to the taxation of the income of a corporation and its share-
holders. In accordance with the tax law in effect for fiscal 1999, re-
tained corporate income is initially subject to a federal corporate
tax of 40% (1998 and 1997: 45%) plus a solidarity surcharge of
5.5% (1998: 5.5%; 1997: 7.5%) on federal corporate taxes payable.
Including the impact of the surcharge, the federal corporate tax
rate amounts to 42.2% (1998: 47.475%; 1997: 48.375%). Upon distri-
bution of certain retained earnings generated in Germany to stock-
holders, the corporate income tax rate on the earnings is adjusted
to 30%, plus a solidarity surcharge of 5.5% (1998: 5.5%; 1997: 7.5%)
on the distribution corporate tax, for a total of 31.65% (1998:
31.65%; 1997: 32.25%), by means of a refund for taxes previously
paid. Upon distribution of retained earnings in the form of a divi-
dend, stockholders who are taxpayers in Germany are entitled to a
tax credit in the amount of federal income taxes previously paid by
the corporation.
For German companies, the deferred taxes for 1999 are calculated
using effective corporate income tax rates of 42.2% (1998 and
1997: 47.475%) plus the after federal tax benefit rate for trade tax
of 9.3% (1998 and 1997: 8.525%). The effect of the tax rate reduc-
tions in 1999 and 1997 on deferred tax balances are reflected
separately in the reconciliations presented below.
Income tax expense (benefit) consists of the following:
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