Income taxes

A breakdown of taxes recognized in the income statement is provided below:

(€ thousand)20132012
Current taxes:    
  • IRES
(17,434) (19,948)
  • IRAP
- -
Other current taxes - 12
Total current taxes (17,434) (19,936)
Deferred taxes for the period:    
  • IRES
- 4,051
  • IRAP
- -
Total deferred taxes for the period - 4,051
Taxes relating to prior periods 2,884 (15,168)
Total income taxes (14,550) (31,053)

Current IRES tax for 2013 relates to compensation receivable by Fiat S.p.A. (€17,434 thousand) for tax loss carryforwards contributed to the domestic tax consolidation scheme.

Taxes relating to prior periods (expense of €2,884 thousand) mainly consisted of an adjustment relating to the prior year’s domestic tax consolidation.

A reconciliation between theoretical income taxes determined on the basis of tax rates applicable in Italy and income taxes reported in the financial statements is as follows:

(€ thousand)20132012
Theoretical income taxes (66,343) (50,436)
Tax effect of permanent differences 9,562 (3,577)
Taxes relating to prior periods 2,884 (15,168)
Other current taxes - 12
Deferred taxes not recognized on tax loss for the year and other deferred taxes  39,347 38,116
Tax loss carryforwards utilized - -
Current and deferred income taxes recognized in the income statement, excluding IRAP (14,550) (31,053)
IRAP (current and deferred) - -
Total income taxes (14,550) (31,053)

Theoretical income taxes are calculated by applying the IRES tax rate (27.5% for 2013 and 2012) to the result before taxes.

The permanent differences referred to above include, among other things, the tax effect of non-taxable income amounting to €144,514 thousand in 2013 (€275,035 thousand in 2012) and of non-deductible costs amounting to €154,076 thousand in 2013 (€271,458 thousand in 2012). In particular, for 2013 the tax effect of non-taxable income was principally attributable to dividends (€140,114 thousand vs. €269,217 thousand in 2012) and impairment reversals on investments (€4,400 thousand vs. €5,799 thousand in 2012). Non-deductible costs principally relate to impairment losses on investments whose tax effect was €153,010 thousand (€270,591 thousand in 2012).

A breakdown of deferred tax liabilities, net of deferred tax assets, is provided in the following table:

(€ thousand)31 December 2012Recognized in income statementCharged to equity31 December 2013
Deferred tax assets arising from:        
  • Taxed provisions and other minor differences
28,935 19,696 - 48,631
Total deferred tax assets 28,935 19,696 - 48,631
Deferred tax liabilities arising from:         
  • Measurement of construction contracts by the percentage completion method
(48,319) 170 - (48,149)
  • Others
(927) (1,920) - (2,847)
Total deferred tax liabilities  (49,246) (1,750) - (50,996)
Theoretical tax benefit arising from tax loss carryforwards  216,560 51,629 - 268,189
Adjustments for assets whose recoverability is not probable  (208,445) (69,575) - (278,020)
Total deferred tax liabilities, net of deferred tax assets (12,196) - - (12,196)

Determination of deferred tax assets is based on an analysis of the existence of the conditions for their future realization, using updated plans and related tax aspects. As a consequence, the total theoretical future tax benefit arising from deductible temporary differences (€48,631 thousand at 31 December 2013 and €28,935 thousand at 31 December 2012) and tax loss carryforwards (€268,189 thousand at 31 December 2013 and €216,560 thousand at 31 December 2012) was reduced by €278,020 thousand at 31 December 2013 (€208,445 thousand at 31 December 2012).

Total temporary differences (deductible and taxable) and tax losses at 31 December 2013 and amounts for which deferred tax assets have not been recognized, broken down by year of expiry, are as follows:

  Year of expiry
(€ thousand)Total at 31 December 20132014201520162017Beyond 2017Non-expiring/undeterminable 
Temporary differences and tax losses               
  • relating to IRES:
  • Deductible temporary differences
176,837 176,837 - - - - -
  • Taxable temporary differences
(155,820) (82,167) (73,653) - - - -
  • Tax losses
975,233 - - - - - 975,233
  • Temporary differences and tax losses for which deferred tax assets have not been recognized
(1,010,981) (94,670) - - - - (916,311)
Temporary differences and tax losses subject to national taxation (14,731) - (73,653) - - - 58,922
Temporary differences relating to IRAP:              
  • Deductible temporary differences
-   - - - - -
  • Taxable temporary differences
(146,225) (82,823) (63,402) - - - -
Temporary differences and tax losses subject to local taxation (146,225) (82,823) (63,402) - - - -