Income taxes, broken down into current and deferred income taxes, are as follows:
|in € millions||2017||2016|
|Earnings before income taxes (total)||1,670||1,556|
|Current income taxes from continuing operations||(462)||(388)|
|Deferred income taxes from continuing operations||(10)||(31)|
|Income taxes from continuing operations||(472)||(419)|
|Current income taxes from discontinued operations||–||–|
|Deferred income taxes from discontinued operations||–||–|
|Income taxes from discontinued operations||–||–|
|Total income taxes||(472)||(419)|
|Net income after income taxes (total)||1,198||1,137|
In the financial year 2017, net income after income taxes was subject to a non-recurring negative impact in the amount of €33 million as a result of the US tax reform (Tax Cuts and Jobs Act) in terms of measurement of deferred tax assets and liabilities of US Group companies. The remeasurement of deferred taxes for US Group companies was carried out at the reduced US corporate tax rate of 21 percent (previously 35 percent). In accordance with announcements published to date, the impacts from the introduction of the Base- Erosion and Anti-Abuse Tax (“BEAT”), which is effective from January 1, 2018, are not considered in the measurement of deferred taxes as of December 31, 2017. In the future, these impacts will be recognized in the year of their occurrence. The US federal tax rate reduction from 35 percent to 21 percent will lead to a lower tax burden in the United States in the future. Further impacts from the US tax reform on the Consolidated Financial Statements can affect the interest deduction in the United States, the minimum taxation and German Controlled foreign corporation (CFC) rules. They are part of a deeper analysis.
In addition, in the financial year 2017, changes in the tax rate for the calculation of long-term temporary differences in France and the United Kingdom were applied, which resulted in a reduction of the tax result of €13 million.
After the shareholding increase in Penguin Random House, the US entities of the division have been considered for the first time in the tax group of Bertelsmann Inc.
Tax loss carryforwards of €389 million (previous year: €433 million) were utilized in the financial year 2017, reducing current tax expenses by €106 million (previous year: €102 million). Of the tax loss carryforwards utilized, €31 million (previous year: €132 million) was due to German corporate income tax, €29 million (previous year: €41 million) was due to German trade tax and €329 million (previous year: €260 million) was due to foreign income taxes. These amounts include €78 million (previous year: €40 million) for tax loss carryforwards for which no deferred tax assets were recognized in the past. These relate to German corporate tax in the amount of €2 million (previous year: €1 million), German trade tax in the amount of €2 million (previous year: €1 million) and foreign income taxes in the amount of €74 million (previous year: €38 million). This led to a reduction in current tax expense of €20 million (previous year: €11 million).
Deferred tax assets and liabilities resulted from the following items and factors:
|in € millions||Assets||Equity and liabilities||thereof recognized in profit or loss in the financial year||Assets||Equity and liabilities||thereof recognized in profit or loss in the financial year|
|Property, plant and equipment||46||39||(14)||63||39||10|
|Advance payments and other assets||160||161||17||113||153||17|
|Advance payments and other liabilities||55||26||7||55||31||5|
|Loss carryforwards/tax credits||239||(94)||355||(39)|
The decrease in deferred tax liabilities for intangible assets and deferred tax assets for tax loss carryforwards mainly relates to the impact of the US tax reform with regard to the measurement of these items.
No deferred tax liabilities were recognized for temporary differences in connection with investments in subsidiaries in the amount of €443 million (previous year: €781 million) as Bertelsmann can control their reversal, and it is probable that these temporary differences will not be reversed in the foreseeable future. Current and deferred tax assets and liabilities are offset against each other if they relate to the same tax authority and meet the criteria for offsetting. The term of the deferred taxes on temporary differences is mostly long term. Information on amounts of income tax relating to other comprehensive income is presented in note 18 "Equity".
Valuation allowances for deferred tax assets are recognized on temporary differences, tax loss carryforwards and tax credits when it is unlikely that they can be utilized in the foreseeable future. The need to recognize valuation allowances is assessed primarily based on existing deferred tax liabilities from temporary differences and projected taxable income within a planning period.
Temporary differences, tax loss carryforwards and tax credits for which no deferred taxes have been recognized can be carried forward as follows:
|in € millions||12/31/2017||12/31/2016|
|Tax loss carryforwards|
|To be carried forward for more than 5 years||6,381||6,488|
|To be carried forward for up to 5 years||128||126|
|To be carried forward for more than 5 years||52||50|
|To be carried forward for up to 5 years||–||1|
A reconciliation of expected tax result to actual tax result is shown in the following table:
|in € millions||2017||2016|
|Earnings before income taxes from continuing operations||1,677||1,555|
|Income tax rate applicable to Bertelsmann SE & Co. KGaA||30.80%||30.80%|
|Expected tax expense from continuing operations||(517)||(479)|
|The tax effects of the following items led to differences between the expected and actual tax expense:|
|Adjustment to different national tax rates||(6)||(8)|
|Effect of changes in tax rate and tax law||(17)||(4)|
|Non-tax-deductible impairment on goodwill||(10)||–|
|Tax effects in respect of results from disposals of investments||37||5|
|Current income taxes for previous years||10||11|
|Deferred income taxes for previous years||(10)||13|
|Effects of measurements of deferred tax assets||23||48|
|Total of adjustments||45||60|
|Actual tax expense from continuing operations||(472)||(419)|
The income tax rate applicable to Bertelsmann SE & Co. KGaA consists of corporate income tax, the solidarity surcharge and trade tax.
|Corporate income tax including solidarity surcharge||15.83%||15.83%|
|Effective income tax rate||30.80%||30.80%|