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4 Income taxes



The income from operating activities attributable to domestic and foreign companies consists of the following:

2003 2002
€ million € million
Germany 290.6 137.0
Abroad 4.2 3.3
294.8 140.3


The current taxes not only relate to taxes where Viterra AG or Viterra Group companies are subject to tax but also to income tax levies with which E.ON credits or debits Viterra. E.ON is liable for these taxes as head of the group of companies for corporate income tax and trade tax purposes (Organschaft). These tax levies are in general determined as if Viterra was independently taxable. For the current year, this resulted in a tax credit of € 301.6 million. To the extent the tax levies received relate to divestments which will be effective in the future, the relevant amount is deferred with regard to property, plant and equipment.

The following tax benefit was determined on this basis:

2003 2002
€ million € million
Current taxes
Germany 278.3 72.3
Abroad –1.4 –1.5
276.9 70.8
Deferred taxes
Germany –228.0 –66.4
Abroad 0.0 0.0
–228.0 –66.4
48.9 4.4


A total tax rate of 39 % has been taken for determining deferred taxes on temporary differences (current or long-term). This tax rate is made up of corporate income tax including a solidarity surcharge of 26 % and trade tax, which amounts to 13 % after deduction of corporate income tax. Notwithstanding the above, the short-term deferred taxes as at December 31, 2002 were calculated at 40 % as a result of the Flood Victim Solidarity Act.

The following table shows a reconciliation from the expected to the actual tax expense in the years 2002 and 2003. To determine the expected tax expense, the 26.5 % tax rate valid in Germany in 2003 (2002: 25 %) is multiplied by the income from operating activities.

2003 2002
€ million € million
Expected tax expense –78.1 –35.0
Foreign tax-rate differential –0.1 –0.2
Tax-free income 107.6 71.5
Adjustments to deferred taxes as a result of changes in tax law or tax rates –0.3 0.2
German trade tax, net of corporate income tax 8.0 –3.1
Change in the valuation allowance on deferred tax assets 1.4 –19.4
Other 10.4 –9.6
Income tax benefit 48.9 4.4


As at December 31, 2003, the domestic corporate income tax loss carryforwards in the Group amounted to € 222.1 million (2002: € 249.0 million) and the domestic trade tax loss carryforwards totalled € 66.5 million (2002: € 85.2 million); foreign loss carryforwards amounted to € 0.4 million (2002: € 0.1 million). According to the tax legislation applicable on December 31, 2003, domestic losses still have no time limit.

As a result of the Law on the Implementation of the Protocol Declaration of the German Government on the Conciliation Recommendation on the Phasing-out of Tax Concessions Law (the so-called Korb II law) passed on December 22, 2003, the system for the treatment of losses under German tax law has been fundamentally changed. In future, corporations can only offset tax loss carryforwards against a maximum of 60 % of their taxable income. Unlimited set-off is only possible for up to € 1 million (so-called threshold). The minimum taxation provision is generally effective from January 1, 2004 and applies similarly to trade tax loss carryforwards. The possibility to carry foreign losses forward is partially restricted. The decrease in loss carryforwards is mainly due to the utilisation of tax loss carryforwards in 2003.

A valuation allowance on deferred tax assets of € 51.7 million (2002: € 53.1 million) was applied. A tax benefit is not expected to be realised for this amount. In determining these amounts, all discernible positive and negative effects on anticipated future tax results were taken into consideration. No deferred taxes are calculated for differences between the carrying value and the tax book values which are attributable to the special treatment of former non-profit housing companies.

The recognised deferred tax assets and liabilities based on the above principles are shown below in relation to the corresponding balance-sheet items:

2003 2002
€ million € million
Property, plant and equipment 9.2 16.7
Financial assets 3.3 2.5
Inventories 2.4 0.3
Receivables 1.0 1.1
Provisions 38.6 17.3
Liabilities 14.3 13.3
Tax carryforwards 66.5 76.5
135.3 127.7
Valuation allowance –51.7 –53.1
Deferred tax assets 83.6 74.6
Property, plant and equipment 194.4 10.7
Financial assets 0.0 0.2
Inventories 0.3 5.1
Receivables 2.9 1.1
Provisions 26.7 2.0
Liabilities 0.5 8.7
Untaxed reserves 305.0 271.8
Deferred tax liabilities 529.8 299.6


After netting, the deferred tax liabilities are as follows:

2003 2002
€ million € million
Deferred tax assets 31.4 68.5
(thereof long-term) (28.9) (46.2)
Deferred tax liabilities 477.6 293.5
(thereof long-term) (475.2) (280.3)
     
Net deferred tax liability 446.2 225.0
(thereof long-term) (446.3) (234.1)


The tax effects on stockholders' equity are as follows:

2003 2002
€ million € million
Result from continuing operations 48.9 4.4
Result from discontinued operations –16.9 –39.3
Accumulated other comprehensive income 5.9 9.4
37.9 –25.5


Other information



The personnel costs contained in the expense items amount to € 150.9 million for 2003 and € 157.3 million for 2002.

On an annual average, 1,919 people were employed in the Group (2002: 2,449). This figure does not include 68 trainees and apprentices (2002: 87).

The advertising expenses recognised in 2003 amounted to € 3.3 million (2002: € 3.8 million).