Mercedes 2006 Annual Report Download - page 182

166
8. 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.
Income tax expense is comprised of the following components:
For German companies, the deferred taxes for all periods present-
ed were calculated using a federal corporate tax rate of 25%,
a solidarity surcharge of 5.5% for each year on federal corporate
taxes plus the after federal tax benefit rate for trade tax of
12.125% for each year. Therefore, the tax rate applied to German
deferred taxes amounted to 38.5%. For non-German companies,
the deferred taxes at period-end were calculated using the enacted
tax rates.
A reconciliation of expected income tax expense to actual
income tax expense determined using the applicable German
combined statutory rate of 38.5% is included in the following
table:
In 2006, DaimlerChrysler Corporation, a wholly-owned subsidiary
of DaimlerChrysler, reached an agreement with the US Internal
Revenue Service regarding its claim for research and development
credits for the tax years 2000 through 2002. The result of the
agreement was an additional income tax benefit of €111 million
in 2006. In addition, DaimlerChrysler Corporation reduced
its income tax expense by €292 million reflecting adjustments to
certain deferred tax balances and income tax reserves, primarily
related to prior years. Those income tax benefits were largely offset
by additional estimated income tax expenses of €252 million
related to ongoing cross-border transfer pricing audits. The tax
benefits and expenses are included in the line “foreign tax rate
differential”.
In 2006, the Group recorded additional valuation allowances
on deferred tax assets on tax loss carryforwards of foreign
subsidiaries. The resulting tax expense is included in the line
“foreign tax rate differential”.
In 2004, the US government enacted the American Jobs Creation
Act of 2004 (“Act”), that provides for a special one-time tax
deduction of 85% of certain earnings of non-US subsidiaries that
are repatriated to the United States, provided certain criteria
are met. DaimlerChrysler North America Holding Corporation, a
wholly-owned US subsidiary of DaimlerChrysler, completed in
2005 its evaluation of the Act. In 2005, DaimlerChrysler repatri-
ated US $2.7 billion of dividends to the US, leading to an income
tax expense of €66 million in 2005. In the reconciliation of expected
income tax expense to actual income tax expense, the expense
is included in the line “foreign tax rate differential”.
Year ended December 31,
2004
20052006
2,444
1,549
3,993
(103)
3,541
3,438
448
3,087
3,535
Germany
Non-German countries
(in millions of €)
Year ended December 31,
2004
20052006
668
563
(77)
(448)
706
3
1,319
(309)
(500)
513
847
923
(502)
(91)
1,177
Current taxes
Germany
Non-German countries
Deferred taxes
Germany
Non-German countries
(in millions of €)
Year ended December 31,
2004
20052006
1,537
(481)
(11)
(113)
(239)
13
706
1,324
(544)
(50)
(15)
(194)
(8)
513
1,361
(357)
(43)
291
(88)
13
1,177
Expected expense for income taxes
Foreign tax rate differential
Trade tax rate differential
Tax effect of equity method
investments
Tax-free income and non-deductible
expenses
Other
Actual expense for income taxes
(in millions of €)