Income taxes are as follows:
|Deferred taxes (benefits) costs||(1,570)||(71)|
|Taxes relating to prior periods||20||8|
|Total Tax (income)/expenses||(943)||623|
In 2013 Income taxes were a positive €943 million, mainly as a consequence of the recognition of previously unrecognized deferred tax assets related to Chrysler of €1,500 million.
In 2013, the Regional Italian Income Tax IRAP recognized within current taxes amounts to €54 million (€60 million in 2012) and IRAP recognized within deferred tax costs amounts to €12 million (€20 million in 2012).
The reconciliation between the theoretical income taxes calculated on the basis of the theoretical tax rate in effect in Italy for IRES (equal to 27.5%) and the income taxes recognized is as follows:
|Theoretical income taxes||277||418|
|Tax effect on:|
|Recognition and utilization of previously unrecognized deferred tax assets||(1,747)||(529)|
|Deferred tax assets not recognized and write-downs||380||473|
|Differences between foreign tax rates and the theoretical Italian tax rate and tax holidays||119||164|
|Taxes relating to prior years||20||8|
|Total Tax (income)/expenses, excluding IRAP||(1,009)||543|
|Effective tax rate||-||35.7%|
|IRAP (current and deferred)||66||80|
|Total Tax (income)/expenses||(943)||623|
Since IRAP taxable basis differs from income before taxes, it is excluded in the above reconciliation.
In 2013, the Group's effective tax rate is not representative because the Group recognized a net tax benefit in relation to a Consolidated Net profit. In particular, in 2013, the theoretical income taxes and the Group's actual differ primarily due to the recognition of previously unrecognized deferred tax assets related to Chrysler for €1,500 million. Excluding this effect, the theoretical tax rate of the Group in 2013 would have been 48.7%. The difference is also affected by other effects arising from the utilization of tax losses carried forward for which deferred tax assets were not recognized in the past. These benefits were partially offset by the negative impact of €380 million (€473 euro in 2012) arising from the unrecognized deferred tax assets on temporary differences and tax losses arising in the year.
In 2013 Other differences include unrecoverable withholding tax of €84 million (€95 million in 2012).
The Group recognizes in its Statement of Financial Position within Deferred tax asset, the amount of Deferred tax assets less the Deferred tax liabilities of the individual consolidated companies, where these may be offset. Amounts recognized are as follows:
|(€ million)||At 31 December 2013||At 31 December 2012|
|Deferred tax assets||2,893||1,738|
|Deferred tax liabilities||(278)||(801)|
Changes in net deferred tax assets of €1,678 million are mainly due to the following:
- recognition of a net benefit of €1,570 million arising on previously unrecognized Deferred tax assets and the recognition of Deferred tax assets on temporary differences arising during the year, net of write-down of deferred tax relating to previous years;
- recognition directly to Equity of net deferred tax assets of €212 million;
- exchange rate differences and other changes for a negative amount of €99 million.
The significant components of Deferred tax assets and liabilities and their changes during the year are as follows:
|(€ million)||At 31 December 2012||Recognized in Income statement||Charged to equity||Changes in the scope of consolidation||Translation differences and other changes||At 31 December 2013|
|Deferred tax asset arising on:|
|Provision for employee benefits||1,022||137||18||-||(47)||1,130|
|Impairment of financial assets||228||13||-||-||(50)||191|
|Allowances for doubtful accounts||90||18||-||-||2||110|
|Deferred tax liabilities arising on:|
|Capitalization of development costs||(1,211)||(252)||-||-||47||(1,416)|
|Brands and other intangibles||(784)||48||-||(17)||113||(640)|
|Provision for employee benefits||(21)||-||-||(1)||2||(20)|
|Deferred tax asset arising on tax loss carry-forward||3,399||437||-||7||(33)||3,810|
|Unrecognized deferred tax assets||(4,918)||1,138||217||-||237||(3,326)|
|Total net Deferred tax assets||937||1,570||212||(5)||(99)||2,615|
The decision to recognize Deferred tax assets is taken for each company in the Group by assessing critically whether the conditions exist for the future recoverability of such assets by taking into account the basis of most recent forecasts from budgets and plans. In this regard at 31 December 2013, in view of the results achieved by Chrysler, of the continuous improvement of its product mix and of its trends in international sales and its implementation of new vehicles, together with the consolidation of the alliance between Fiat and Chrysler, following Fiat’s acquisition of full control at the beginning of 2014, the Group recognized previously unrecognized deferred tax assets for a total of €1,734 million, of which €1,500 million recognized in Income taxes and €234 million in Other comprehensive income/(losses). Moreover, in respect to the Group’s Italian entities, at 31 December 2013, despite a tax loss in the national tax consolidation, the Group continued to recognize Deferred tax assets for €1,016 million (€1,063 million at 31 December 2012) on the basis of the future taxable income expected to arise in future periods and taking into account that these tax losses can be carried forward indefinitely.
At 31 December 2013, the Group had deferred tax assets on deductible temporary differences of €6,173 million (€6,353 million at 31 December 2012), of which €435 million was not recognized (€2,445 million at 31 December 2012). At the same date the Group had also theoretical tax benefit on losses carried forward of €3,810 million (€3,399 million at 31 December 2012), of which €2,891 million was unrecognized (€2,473 million at 31 December 2012). At 31 December 2013, net deferred tax assets included the amount of €919 million in respect of benefits on unused tax losses carry-forwards (€926 million at 31 December 2012).
Deferred taxes on the undistributed earnings of subsidiaries have not been recognized, except in cases where it is probable they earnings will be distributed in the foreseeable future.
The totals of deductible and taxable temporary differences and accumulated tax losses at 31 December 2013, together with the amounts for which deferred tax assets have not been recognized, analyzed by year of expiry, are as follows:
|Year of expiry|
|Temporary differences and tax losses relating to State taxation (IRES in Italy):|
|Deductible temporary differences||18,768||4,997||1,738||1,641||1,803||8,589||-|
|Taxable temporary differences||(11,604)||(1,133)||(1,396)||(1,229)||(1,218)||(5,360)||(1,268)|
|Amounts for which deferred tax assets were not recognized||(11,546)||(685)||(90)||(193)||(136)||(172)||(10,270)|
Temporary differences and tax losses relating to State taxation
|Temporary differences and tax losses relating to local taxation (IRAP in Italy):|
|Deductible temporary differences||18,570||3,922||1,946||2,248||2,067||8,387||-|
|Taxable temporary differences||(15,151)||(1,193)||(1,634)||(1,540)||(1,529)||(6,934)||(2,321)|
|Amounts for which deferred tax assets were not recognized||(1,169)||(124)||(30)||(21)||(13)||(212)||(769)|
Temporary differences and tax losses relating to local taxation