[14] Income taxes

The income tax expense of €41.9 million (2016: expense of €93.1 million) consisted of €184.9 million in current tax expense (2016: current tax expense of €86.2 million) and €143.0 million in deferred tax income (2016: deferred tax expense of €6.9 million). The current tax expense included income of €16.2 million (2016: expense of €0.3 million) relating to previous financial years. The deferred tax income included income of €92.2 million, which relates to the decision taken on 22 December 2017 to lower the corporate income tax rate in the United States from 35.0 per cent to 21.0 per cent.

At the reporting date, there were income tax assets of €14.4 million receivable from tax authorities (2016: €35.2 million) and income tax liabilities of €82.6 million (2016: €63.0 million).

Deferred taxes are recognised for temporary differences between the tax base and IFRS carrying amounts. Deferred taxes are determined on the basis of the tax rates that will apply at the recovery date, or have been announced, in accordance with the current legal situation in each country concerned. The current corporate income tax rate in Germany is 15.0 per cent plus the solidarity surcharge (5.5 per cent of corporate income tax). Taking into account the average trade tax rate of 15.00 per cent (2016: 15.03 per cent), the combined nominal tax rate for entities in Germany was 30.82 per cent (2016: 30.85 per cent). The income tax rates for foreign companies used in the calculation of deferred taxes were between 9.0 per cent and 34.0 per cent (2016: between 9.0 per cent and 40.0 per cent).

No deferred taxes have been recognised on temporary differences of €231.4 million (2016: €78.7 million) between the net assets reported in the consolidated financial statements for the Group companies and the tax base for the shares in these Group companies (outside basis differences) because the KION Group is in a position to manage the timing of the reversal of temporary differences and there are no plans to dispose of investments in the foreseeable future.

Deferred tax assets are allocated to the following items in the statement of financial position: > TABLE 057

Deferred tax liabilities are allocated to the following items in the statement of financial position: > TABLE 058

The deferred tax liabilities essentially related to the purchase price allocation in the acquisition of the KION Group and Dematic, particularly for intangible assets and property, plant and equipment.

In 2017, deferred taxes – not including currency effects – of minus €10.5 million were recognised in other comprehensive income (loss), resulting in a decrease in equity (2016: €17.2 million, resulting in an increase in equity). Of this amount, deferred taxes of minus €8.0 million (2016: €16.7 million) arose from the remeasurement of the defined benefit obligation. Furthermore, deferred taxes of minus €2.4 million (2016: €0.4 million) were recognised in connection with realised and unrealised changes in the fair value of derivatives in cash flow hedges (minus €1.7 million; 2016: €1.1 million) and net investment hedges (minus €0.7 million; 2016: minus €0.7 million). In 2017, deferred taxes of minus €0.1 million were recognised for the first time on the remeasurement of available-for-sale financial instruments, resulting in a decrease in equity.

The deferred taxes recognised in the statement of financial position also rose as a consequence of the purchase price allocation in connection with the other acquisitions (2017: rise in deferred tax assets of €1.5 million; 2016 primarily in relation to the Dematic acquisition: rise in deferred tax assets of €104.8 million and rise in deferred tax liabilities of €601.2 million). In addition, currency translation as at the reporting date led to deferred taxes of €33.9 million (2016: minus €18.0 million) that were predominantly attributable to the first-time consolidation of Dematic. These currency effects were recognised in other comprehensive income (loss) under cumulative translation adjustment, resulting in an increase in equity (2016: resulting in a decrease in equity).

In 2017, the parent company and subsidiaries that reported losses for 2017 or 2016 recognised net deferred tax assets on temporary differences and on loss carryforwards totalling €24.2 million (2016: €29.4 million). The assets were considered to be unimpaired because these companies are expected to generate taxable income in future.

No deferred tax assets have been recognised on tax loss carryforwards of €526.0 million (2016: €509.3 million) – of which €13.0 million (2016: €29.4 million) can only be carried forward on a restricted basis –, on interest carryforwards of €185.0 million (2016: €193.5 million) or on other temporary differences of €5.2 million (2016: €4.7 million).

Deferred taxes are recognised on tax loss carryforwards and interest carryforwards to the extent that sufficient future taxable income is expected to be generated against which the losses can be utilised. The total amount of unrecognised deferred tax assets relating to loss carryforwards is therefore €124.5 million (2016: €139.6 million), of which €120.9 million (2016: €130.1 million) concerns tax losses that can be carried forward indefinitely.

The KION Group’s corporation-tax loss carryforwards in Germany as at 31 December 2017 amounted to €109.1 million (31 December 2016: €126.1 million), while trade-tax loss carryforwards stood at €88.6 million (31 December 2016: €97.3 million). There were also foreign tax loss carryforwards totalling €481.1 million (31 December 2016: €547.8 million).

The interest that can be carried forward indefinitely in Germany as at 31 December 2017 amounted to €185.0 million (31 December 2016: €206.1 million).

The table below shows the reconciliation of expected income tax expense to effective income tax expense. The Group reconciliation is an aggregation of the individual company-specific reconciliations prepared in accordance with relevant local tax rates, taking into account consolidation effects recognised in income. The expected tax rate applied in the reconciliation is 30.82 per cent (2016: 30.85 per cent). > TABLE 059