Notes to the Consolidated Income Statements

The domestic and foreign income tax expense of the corporation is as follows:

in € millions	2011	2010
Current taxes (domestic)	-2.5	-101.5
Current taxes (foreign)	-427.0	-404.0
Deferred taxes (domestic)	-95.1	-93.6
Deferred taxes (foreign)	-11.6	7.0
Income tax expense	-536.2	-592.1

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The average domestic tax rate for 2011, as in 2010, was 30.0%. This takes into account a corporate tax rate of 15.0% (PY: 15.0%), a solidarity surcharge of 5.5% (PY: 5.5%) and a trade tax rate of 14.2% (PY: 14.2%).

The following table shows the reconciliation of the expected to the reported tax expense:

in € millions	2011	2010
Net income before tax	1,861.4	1,238.0
Expected tax expense at the domestic tax rate	-558.4	-371.4
Foreign tax rate differences	80.1	101.1
Non-recognition of deferred tax assets unlikely to be realized	-88.5	-273.6
Realization of previously non-recognized deferred taxes	33.9	—
Non-deductible expenses and non-imputable withholding taxes	-92.2	-94.3
Incentives and tax holidays	50.3	47.5
Taxes for previous years	47.7	-39.2
Tax effect of companies consolidated at equity	22.6	19.2
Local income tax with different tax base	-13.8	—
Effects from changes in enacted tax rate	-11.6	3.7
First-time recognition of deferred tax assets likely to be realized	—	14.0
Effects from disposals and impairment of business units and investments	-1.6	-0.1
Other	-4.7	1.0
Reported tax expense	-536.2	-592.1
Effective tax rate in %	28.8	47.8

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The reduction in the expected tax expense from the difference in foreign tax rates primarily reflects the volume of activities in Eastern Europe and Asia.

The effect of not recognizing deferred tax assets due to insufficient probability of recoverability is much lower than in the previous year. In the year under review, there was the effect of impairment losses recognized in international units in particular on deferred tax assets of a total amount of €52.5 million (PY: €234.3 million), €29.3 million (PY: €11.8 million) of which for previous years. A valuation allowance of €36.0 million (PY: €51.2 million) was recognized on the increases in the year under review for the tax interest carryforward in Germany. In the same period of the previous year, this amount was also influenced by €68.9 million relating to 2009 as the utilization of the interest carryforward in Germany was considered sufficiently unlikely for the first time. For further information please see Note 16.

Thanks to the positive business development in the year under review in the U.S.A. and Mexico in particular, deferred tax assets of €33.9 million which had not been recognized in the past could be realized – mainly through the utilization of loss carryforwards.

As in the previous year, the item non-deductible expenses and non-imputable withholding taxes relates in part to Germany owing to an insufficient volume of non-imputable foreign withholding taxes.

The taxes for previous years item essentially includes tax income of €68.2 million from the successful out-of-court settlement of a pending tax position from previous years which was recognized in profit or loss in full in the year under review.

The tax effects from government incentives and tax holidays rose slightly against the previous year. A reduction due to some expiring subsidies in Eastern Europe was partially offset in particular by increased benefits in Asia due to the first-time qualification for incentives.

The results of investments accounted for using the equity method included in net income resulted in tax income of €22.6 million in the year under review (PY: €19.2 million).

In the year under review, local income taxes of €13.8 million were incurred with an alternative assessment basis, mainly in Hungary, the U.S.A. and Italy.

The effects of changes in enacted tax rate relate to the remeasurement of deferred tax assets and liabilities that was required predominantly in Thailand and the U.K. in the year under review (PY: Mexico) due to changes in the law already taking effect with regard to future applicable tax rates.

The previous year's figures are presented comparably.

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