[13] Income tax 

The tax expense consists of corporation and trade income taxes for the companies domiciled in Germany as well as comparable income taxes for foreign companies. Taxes for other periods include trade tax refunds in Germany and risk provisioning, both of which relate to prior years.

In 2011, changes in tax rates in individual companies resulted in a deferred tax expense of € 3.0 million (2010: expense of € 0.1 million). One-time deferred tax income of € 22.2 million was recognized owing to change in applicable tax rates. In addition, one-time deferred tax income of € 14.2 million resulted from the revaluation of deferred tax liabilities in connection with the shorter amortization period for Rebif®.

The reconciliation between deferred taxes in the balance sheet and deferred taxes in the income statement is presented below:

Tax loss carryforwards are structured as follows:

The decrease in tax loss carryforwards compared to 2010 was mainly the result of the positive business development of the relevant Group companies. Deferred tax assets are recognized for tax loss and interest carryforwards only if realization of the related tax benefits is probable in the foreseeable future.

The vast majority of the tax loss carryforwards either has no expiry date or can be carried forward for up to 20 years. The interest carryforward results from the German earnings stripping rule. In 2011, the income tax expense was reduced by € 25.7 million (2010: € 20.0 million) due to the utilization of tax loss carryforwards from prior years for which no deferred tax asset had been recognized in prior periods.

The tax loss carryforwards accumulated in Germany for corporation tax amounted to € 1.4 million (2010: € 1.5 million) and to € 0.4 million (2010: € 0.5 million) for trade tax.

The additional theoretically possible deferred tax assets amounted to € 28.5 million (2010: € 21.0 million).

Deferred tax assets and liabilities correspond to the following balance sheet items:

In addition to deferred tax assets on tax loss carryforwards, deferred tax assets of € 694.9 million (2010: € 553.9 million) were recognized for other temporary differences.

As of the balance sheet date, deferred tax liabilities for temporary differences for interests in subsidiaries as regards planned dividend payments amount to € 100.2 million (2010: € 102.8 million). Of this amount, € 83.5 million relates to deferred tax liabilities for non-distributed profits which had been accrued within the scope of the Millipore acquisition. In 2010, a deferred tax asset of € 3.0 million was recognized for the announced divestment of Crop BioScience. No deferred tax liabilities were recognized for other temporary differences since the reversal of these differences is not foreseeable. Temporary differences relating to the retained earnings of subsidiaries amount to € 3,508.8 million.

The following table presents the tax reconciliation from theoretical tax expense to tax expense before exceptional items and tax expense according to the income statement. The theoretical tax expense is determined by applying the statutory tax rate of 30.7% of a corporation headquartered in Darmstadt.