Income taxes are calculated on the basis of applicable or anticipated tax rates according to the prevailing legal situation in the individual countries as of the realization date. These tax rates are generally based on the legal statutes valid or adopted as of the balance sheet date. In Germany, a solidarity surcharge is added to corporate tax. Trade income tax, which varies depending on the municipality in which a company is located, must also be paid.

Tax Rates in Germany

Deferred taxes of German companies are therefore measured based on a total tax rate (including solidarity surcharge) of 28.2 percent (2012: 27.5 percent). The income from foreign Group companies is subject to taxation at the tax rates valid in the country in which the respective company is based. The respective local income tax rates applicable in each country for foreign companies range from 10.0 percent to 39.0 percent (2012: from 10.0 percent to 40.5 percent).

Deferred taxes on undistributed profits of subsidiaries were recognized only if distribution is planned. The amount of € 537.1 million (2012: € 492.5 million) is available for distribution.

The tax expenses of € 24.7 million reported for fiscal 2013 were € 16.0 million higher than the expected tax expenses of € 8.7 million that would have resulted from the application of the total tax rate for Germany of 28.2 percent.

Income taxes include current tax income for prior years of € 1.2 million (2012: tax expenses of € 2.9 million) and deferred tax income from other periods of € 5.0 million (2012: € 4.7 million).

Allocation of Deferred Taxes

Deferred tax assets and liabilities are offset whenever there are future tax amounts imposed on, or credited to, the same taxpayer by the same tax authority. In addition, deferred tax assets are recognized only if it is probable that these tax benefits will be realized.

The substantial changes of € 41.0 million in deferred tax assets and liabilities were recognized in profit or loss (2012: € 21.6 million), while € –55.1 million was recognized directly in equity (2012: € 102.7 million). The existing tax loss carryforwards can be used as follows:

Tax loss carryforwards generated outside Germany amount to a total of € 279.8 million (2012: € 260.4 million). A total of € 0.4 million (2012: € 5.3 million) relates to realizable loss carryforwards. Associated deferred tax assets for 2013 amounted to € 0.2 million (2012: € 1.5 million). Deferred taxes are not recognized on losses that are not realizable. In theory, however, an amount of € 78.7 million (2012: € 70.2 million) would have resulted from such recognition. Of the loss carryforwards that are not realizable for tax purposes, the amount of € 55.7 million (2012: € 8.4 million) is unlimited as to time and amount. As of December 31, 2013, no deferred tax assets were recognized for tax-deductible temporary differences of € 267.7 million (2012: € 325.4 million).