Mercedes 2002 Annual Report Download - page 116

110 |Notes to Consolidated Statements of Income (Loss)
9. Income Taxes
Income (loss) before income taxes consists of the following:
Income tax expense (benefit) is comprised of the following
components:
For German companies, the deferred taxes at December 31,
2002 are calculated using a federal corporate tax rate
of 26.5% (2001 and 2000: 25%) for deferred taxes which will
reverse in the next year and 25% (2001 and 2000: 25%) for
deferred taxes which will reverse after one year. Deferred
taxes are also calculated with a solidarity surcharge of 5.5%
for each year on federal corporate taxes payable plus the after
federal tax benefit rate for trade tax of 11.842% (2001 and
2000: 12.125%) for deferred taxes which will reverse in the
next year and 12.125% (2001 and 2000: 12.125%) for
deferred taxes which will reverse after one year. Including the
impact of the surcharge and the trade tax, the tax rate applied
to German deferred taxes amounts to 39.8% (2001 and 2000:
38.5%) for deferred taxes which will reverse in the next year
and 38.5% (2001 and 2000: 38.5%) for deferred taxes which
will reverse after one year.
In 2002, the German government enacted new tax legis-
lation 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 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 13 million is includ-
ed in the consolidated statement of income (loss) in 2002.
In 2000, the German government enacted new tax legislation
which, among other changes, reduced the Group’s statutory
corporate tax rate for German companies from 40% on
retained earnings and 30% on distributed earnings to a uniform
25%, effective for the Group’s year beginning January 1, 2001.
The significant 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 deferred tax assets and
liabilities of the Group’s German companies were recognized
in the year of enactment. As a result, a net charge of 1263
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 1373 million. The exemp-
tion from tax for certain gains from the sale of shares resulted
in deferred tax benefit of 1110 million due to the elimination
of the net deferred tax liabilities on the net unrealized gains.
The effect of the tax law changes in Germany in 2002 and
2000 are reflected separately in the reconciliations presented
below.
For the year ending December 31, 2000, the German corpo-
rate 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 2000, retained corporate income was
initially subject to a federal corporate tax of 40% plus a soli-
darity surcharge of 5.5% on federal 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 income tax rate on the earnings was adjusted
to 30%, plus a solidarity surcharge of 5.5% on the distribution
corporate tax, for a total of 31.65%, 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. As of December 31, 2002, the Group has used
substantially all of its credit for German corporate tax on the
distribution of retained earnings.
A reconciliation of expected income taxes to actual income
tax expense (benefit) determined using the applicable German
corporate tax rate for the calendar year of 25% (2001: 25%;
2000: 40%) plus a solidarity surcharge of 5.5% on federal cor-
porate taxes plus the after federal tax benefit rate for trade
taxes of 12.125% (2001: 12.125%; 2000: 9.3%) for a combined
statutory rate of 38.5% in 2002 (2001: 38.5%; 2000: 51.5%)
is as follows:
(in millions of 3)
2,729
1,747
4,476
2000
4,498
(5,981)
(1,483)
4,379
1,689
6,068
20012002
(in millions of 3)
(45)
1,160
1,490
(606)
1,999
2000
793
(512)
637
(1,695)
(777)
1,195
(286)
(430)
698
1,177
2001
2002
Year ended December 31,
Year ended December 31,
Germany
Non-German countries
Current taxes
Germany
Non-German countries
Deferred taxes
Germany
Non-German countries