Taxes

This item shows the income taxes due by the Italian and the foreign consolidated companies by applying the income tax rates and rules in force in each country.

The components of the income tax expense for 2012 and 2011 are as follow.

(€ million) 31.12.2012 31.12.2011
Income taxes 1,014 977
Italy 346 212
Other countries 668 765
Deferred taxes 227 -325
Italy 110 -6
Other countries 117 -319
Total taxes of period 1,240 652
Income taxes on discontinued operations(1)
95 0
Total income taxes 1,335 652

(1) The item includes income taxes of Migdal Group for € 2 mln and the fiscal effect of locally recognized realized profit on the disposal of the partecipation in Migdal Group for € 92 mln.

The Group’s parent company, Assicurazioni Generali S.p.A., and its Italian subsidiaries apply the Italian corporate income tax rate of 27.5% for the fiscal year 2012 and 2011. Furthermore, income taxes of Italian companies include the regional tax on productive activities (IRAP).

Income realized in Germany is subject to the corporate income tax - which is calculated on a rate of 15% plus a solidarity surcharge of 5.5% - and the trade tax (Gewerbesteuer). The trade tax varies depending on the municipality in which the company is situated. In 2012 the weighted average tax rate remained substantially unchanged at 16.2%.

In France, income taxes are calculated by using the corporate tax rate of 36,1%. The French corporate tax rate in effect amounts to 33.33%, plus a surcharge of 3.3% (contribution sociale). Until the fiscal year 2014, the corporate tax includes a temporary 5% surcharge. Both surcharges are calculated on the tax rate of 33.33%.

All other foreign subsidiaries apply their national tax rates as well, among others: Austria (25%), Belgium (34%), Bulgaria (10%), China (25%), Czech Republic (19%), Israel (25%), Netherlands (25%), Romania (16%), Spain (30%) Switzerland (22%) and USA (35%).

The following table shows a reconciliation from the theoretical income tax expense, by using the Italian corporate income tax rate of 27.5%, to the effective tax expense.

(€ million) 31.12.2012 31.12.2011
Expected income tax rate 27.5% 27.5%
Earnings before taxes 1,635 1,805
Expected income tax expense 450 496
Effect of foreign tax rate differential -26 -87
Effect of permanent differencies 676 187
Effect of fiscal losses -1 -37
IRAP, trade tax and other local income taxes 155 168
Foreign withholding taxes not recoverable 22 25
Income taxes for prior years -72 -91
Exit tax su Réserve de Capitalisation 54 0
Other -16 -9
Effective tax expenses 1,240 652
Effective tax rate 75.9% 36.1%

The effective tax rate in 2012 (75.89%) is higher than the effective tax rate of the previous year (36.12%), mainly due to a material amount of non-deductible impairment charges on equity instruments, an increase of Italian income taxes on foreign subsidiaries and an exit tax on Réserve de Capitalisation in France.

The tax benefit of € 26 million concerning the foreign tax rate differential corresponds to the difference between the expected income taxes, calculated at each entity level by applying the foreign statutory corporate tax rate, and the expected income taxes, calculated by using the Italian corporate tax rate (27.50%).

Furthermore, the effect of permanent differences equal to € 676 million mainly represents the impact of non-deductible financial impairments and realized capital losses on equity instruments (mainly Enel, Intesa San Paolo and Telco), together with non-taxable dividends and realized capital gains on equity instruments.

Income taxes for prior years refer principally to some tax refunds obtained by a German company.

Fiscal losses carried forward are recognized to the extent that future taxable income will be sufficient to offset the amount of the losses before their expiration.

Fiscal losses carried forward as of 31 December 2011 and 2010 are scheduled according to their expiry periods as follows:

(€ million) 31.12.2012 31.12.2011
2012 0 7
2013 64 4
2014 6 23
2015 13 36
2016 20 22
2017 24 0
2018 0 0
2019 0 0
2020 0 0
2021 and over 0 0
Unlimited 251 640
Fiscal losses carried forward 379 732

Deferred income taxes are calculated on the temporary differences between the carrying amounts of assets and liabilities reported in the financial statements and their tax base, by using the tax rates applicable at the expected time of realization according to each country’s current legislation.

The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Furthermore, in making this assessment, the management considers the scheduled reversal of deferred tax liabilities and tax planning strategies.

Assessments show that deferred tax assets will be recovered in the future through either (i) expected taxable income of each consolidated company or (ii) expected taxable income of other companies included in the same tax group (e.g. “Consolidato fiscale” in Italy, “Steuerliche Organschaft” in Germany and “Régime d’intégration fiscale” in France).

Deferred taxes as of 31 December 2012 and 2011 are related to the following assets and liabilities:

(€ million) 31.12.2012 31.12.2011
Intangible assets 160 167
Tangible assets 59 48
Land and buildings (investment properties) 755 758
Available for sale financial assets 2,298 3,242
Other investments 292 213
Deferred acquisition costs 18 20
Other assets 341 319
Fiscal losses carried forward 134 208
Allocation to other provisions and payables 347 397
Insurance provisions 447 393
Financial liabilities and other liabilities 648 895
Other 119 183
Total deferred tax assets 5,617 6,843
Netting -3,303  
Total net deferred tax assets 2,314 6,843
(€ million) 31.12.2012 31.12.2011
Intangible assets 387 433
Tangible assets 175 191
Land and buildings (investment properties) 332 329
Available for sale financial assets 4.111 723
Other investments 282 243
Deferred acquisition costs 516 532
Other assets 80 97
Allocation to other provisions and payables 119 323
Insurance provisions 38 2.840
Financial liabilities and other liabilities 202 164
Other 58 73
Total deferred tax liabilities 6.300 5.949
Netting -3.303  
Total net deferred tax liabilities 2.967 5.949

Netting is attributable to assets and liabilities which relate to the same tax jurisdiction.