Mercedes 2001 Annual Report Download - page 93

Notes to Consolidated Statements of Income (Loss) 89
9. Income Taxes
Income (loss) before income taxes consists of the
following:
(in millions of €)
Germany
Non-German countries
4,498 2,729 2,688
(5,981) 1,747 6,969
(1,483) 4,476 9,657
1999
Year ended December 31,
20002001
Current taxes
Germany
Non-German countries
Deferred taxes
Germany
Non-German countries
(in millions of €)
793 (45) 1,074
(512) 1,160 1,538
637 1,490 836
(1,695) (606) 1,085
(777) 1,999 4,533
1999
Year ended December 31,
20002001
Income tax expense (benefit) are comprised of the
following components:
For German companies, the deferred taxes at De-
cember 31, 2001 are calculated using a federal corpo-
rate tax rate of 25% (2000: 25%; 1999: 40%) plus a soli-
darity surcharge of 5.5% for each year on federal corpo-
rate taxes payable plus the after federal tax benefit rate
for trade tax of 12.125% (2000: 12.125%; 1999: 9.3%).
Including the impact of the surcharge and the trade
tax, the tax rate applied to German deferred taxes
amounts to 38.5% (2000: 38.5%; 1999: 51.5%).
In 2000, the German government enacted new tax
legislation which, among other changes, reduced the
Group’s statutory corporate tax rate for German compa-
nies from 40% on retained earnings and 30% on distrib-
uted earnings to a uniform 25%, effective for the
Group’s year beginning January 1, 2001. The signifi-
cant other tax law change is the exemption from tax for
certain gains and losses from the sale of shares in
affiliated and unaffiliated companies. The effects of the
reduction in the tax rate and other changes on the de-
ferred tax assets and liabilities of the Group’s German
companies were recognized in the year of enactment.
As a result, a net charge of €263 million is included in
the consolidated statement of income (loss) in 2000.
The effects of the reduction in the tax rate resulted in
deferred tax expense of €373 million. The exemption
from tax for certain gains from the sale of shares
resulted in deferred tax benefit of €110 million due to
the elimination of the net deferred tax liabilities on the
net unrealized gains.
In 1999, the tax laws in Germany were changed
including a reduction in the retained corporate income
tax rate from 45% to 40% and the broadening of the tax
base. The effects of the changes in German tax laws
were recognized as a net charge of €812 million in the
consolidated statement of income (loss) in 1999. The ef-
fects of the reduction in the tax rate on the deferred tax
assets and liabilities of the Group’s German companies
as of December 31, 1998 amounted to €290 million.
The broadening of the tax base resulted in tax expense
of €522 million.
The effect of the tax law changes in Germany in
2000 and 1999 are reflected separately in the reconcili-
ations presented below.
For the years ending December 31, 2000 and
1999, the German corporate tax law applied a split-rate
imputation with regard to the taxation of the earnings
of a corporation. In accordance with the tax law in
effect for those fiscal years, retained corporate income
was initially subject to a federal corporate tax of 40%
plus a solidarity surcharge of 5.5% for each year on fed-
eral corporate taxes payable. Including the impact of
the surcharge, the federal corporate tax rate amounted
to 42.2%. Upon distribution of certain retained earnings
generated in Germany to stockholders, the corporate in-
come tax rate on the earnings was adjusted to 30%,
plus a solidarity surcharge of 5.5% for each year on the
distribution corporate tax, for a total of 31.65% for each
year, by means of a refund for taxes previously paid.
Under the new German corporate tax system, during a
15 year transition period beginning on January 1, 2001,
the Group will continue to receive a refund on the
distribution of retained earnings which existed as of
December 31, 2000.