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(28) Income taxes

This item comprises the income taxes paid or accrued in the individual countries, plus deferred taxes. Income taxes are computed on the basis of local tax rates.

The breakdown of income taxes by origin is as follows:

Income Taxes by Origin
     
€ million 2011 2012
     
Current taxes (129) (118)
Deferred taxes resulting from    
temporary differences 13 (61)
statutory changes in tax rates (1) 0
loss carryforwards (31) 25
Income taxes (148) (154)
 

The actual tax expense for 2012 was €154 million (2011: €148 million). This figure differed by €57 million (2011: €58 million) from the expected tax expense of €211 million (2011: €206 million).

The expected tax expense for the LANXESS Group is calculated by applying an unchanged overall tax rate of 31.5% for the German companies. This comprises a corporation tax rate of 15.0%, plus a solidarity surcharge (5.5% of corporation tax) and trade tax.

The reconciliation of the expected tax result to the actual tax result is as follows:

Reconciliation to Reported Tax Income
     
€ million 2011 2012
     
Income before income taxes 655 669
Aggregated income tax rate of LANXESS AG 31.5% 31.5%
Expected tax expense (206) (211)
Tax difference due to differences between local tax rates and the hypothetical tax rate 75 55
Reduction in taxes due to    
tax-free income and reduction of tax bases 7 8
utilization of unrecognized loss carryforwards 25 0
Increase in taxes due to non-tax-deductible expenses (5) (11)
Other tax effects (44) 5
Actual tax result (148) (154)
Effective tax rate 22.6% 23.0%
 

The deferred tax assets and liabilities are allocable to the various items of the statement of financial position as follows:

Deferred Taxes
         
€ million Dec. 31, 2011 Dec. 31, 2012
         
  Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities
         
Intangible assets 7 40 14 55
Property, plant and equipment 4 146 3 160
Inventories 38 4 27 3
Receivables and other assets 5 39 2 44
Pension provisions 98 0 153 0
Other provisions 110 0 98 11
Liabilities 49 11 39 3
Loss carryforwards 50 69
  361 240 405 276
of which non-current 159 214 239 237
Set-off (165) (165) (194) (194)
  196 75 211 82
 

The change in deferred taxes is calculated as follows:

Changes in Deferred Taxes
     
€ million 2011 2012
     
Deferred taxes as of January 1 130 121
Tax income/expense recognized in the income statement (19) (36)
Changes in scope of consolidation (31) (7)
Taxes recognized in other comprehensive income 41 53
Exchange differences 0 (2)
Deferred taxes as of December 31 121 129
 

The deferred income taxes recognized in other comprehensive income comprised €71 million (2011: €29 million) relating to actuarial gains and losses, the impact of the asset ceiling and minimum funding requirements for defined-benefit pension plans, and minus €18 million (2011: €12 million) relating to financial instruments.

Deferred tax assets of €16 million (2011: €35 million) related to tax jurisdictions in which losses were recorded in 2012 or 2011. In this respect, the LANXESS Group has taken into consideration tax planning calculations and customary and feasible tax strategies.

Based on tax planning calculations and strategies, deferred tax assets of €69 million (2011: €50 million) were recognized on the €225 million (2011: €164 million) in tax loss carryforwards that represent income likely to be realized in the future.

Deferred taxes were not recognized for €182 million (2011: €206 million) of tax loss carryforwards. Of this amount, €154 million (2011: €195 million) can theoretically be used over more than five years. Further, deferred tax assets were not recognized in 2012 for tax-deductible temporary differences of €63 million (2011: €45 million). Accordingly, deferred tax assets on loss carryforwards of €49 million (2011: €65 million) and deferred tax assets on tax-deductible temporary differences of €22 million (2011: €15 million) were not recognized.

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