(30) Income Taxes

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Income tax expense (benefit) attributable to income before income taxes consists of the following:

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2014

2013

Current income tax

43,107

50,604

Deferred income tax

−41,826

22,507

Income taxes

1,281

73,111

The table below provides information about the allocation of total income tax in the Consolidated Financial Statements:

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2014

2013

*

See Note (29).

Continuing operations

1,281

73,111

Other comprehensive income

−4,974

2,713

Tax benefit relating to hybrid capital*

−8,438

−10,636

Tax benefit relating to capital increase*

−4,052

0

Total income taxes

−16,183

65,188

The following table shows the major reconciling items between the reported income taxes and the amount of income taxes that would have resulted by applying the Austrian statutory income tax rate of 25% to pre-tax income:

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2014

2013

Income tax expense (benefit) at statutory rate

−46,029

31,310

Foreign tax rate differential

33,091

−10,582

Tax-non-deductible expenses

9,876

6,192

Tax incentives and tax-exempted income

−10,428

−4,803

Tax-free income (loss) from investments

−180

−444

Change in tax rate

0

−2

Tax expense previous years

6,854

6,322

Deferred tax assets not recognised

184,739

21,123

Impairments (reversals of impairments) of investments in subsidiaries
and other intragroup transactions

−201,109

26,791

Impairment of goodwill

30,821

0

Result from changes in reporting entities

−6,870

−1,141

Other

517

−1,654

Income taxes

1,282

73,111

Effective income tax rate

−0.70%

58.38%

In 2014 and 2013, non-deductible expenses mainly consist of withholding taxes on dividends and representation expenses as well as in 2014, non-deductible remuneration of managers in Austria. Tax incentives and tax-exempted income in 2014 relate mainly to investment incentives in Slovenia and to group taxation in Austria. In 2013, they relate mainly to a tax incentive in Belarus, which allows for the tax-neutral revaluation of carrying amounts of property plant and equipment for tax purposes in order to increase the future basis of depreciation. Furthermore, research, education and investment incentives as well as other government grants are included.

In 2013, the effect of the change in tax rates resulted from the reduction in the corporate income tax rate in Slovakia. The aggregated corporate income tax rate was reduced from 23% to 22% at the beginning of 2014.

The tax expense for prior periods recognised in 2014 and 2013 results mainly from the application of financial reporting in hyperinflationary economies in accordance with IAS 29 in Belarus.

In 2014, the impairment of goodwill mainly relates to the effect of the impairment in the segment Bulgaria amounting to TEUR 34,060 as well as the relating deferred tax gain of TEUR 3,749 from the release of a deferred tax liability on goodwill which was tax deductible in Bulgaria until 2006. In 2013, the tax effect of the impairment amounted to TEUR 5,940, which was offset by the release of the related deferred tax liability. The corporate tax rate in Bulgaria amounts to 10%, the difference to the Austrian statutory tax rate of 25% is reported in the foreign tax rate differential.

The result from changes in reporting entities in 2014 relates to the gain resulting from the merger of mobilkom liechtenstein (see Note (2)). In 2013, the result from changes in reporting entities comprises the gain resulting from a bargain purchase and the loss from the sale of a subsidiary.

Impairments (reversals of impairments) of investments relate to write-downs and reversals of write-downs of investments in affiliated companies in Austria, which are recognised over a period of seven years for tax purposes and for which deferred tax is calculated (according to the respective guidance in “Effects of tax write-downs according to section 12/3/2 of the Austrian Corporate Tax Act on the accounting of income taxes according to IAS 12 in consolidated or single IFRS financial statements” issued by the Austrian Financial Reporting and Auditing Committee).

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are set out below:

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2014

2013

Deferred tax assets

 

 

Deferred deduction for impairments of investments in subsidiaries

149,355

75,801

Loss carry-forwards

8,517

47,567

Accounts receivable – trade

6,463

8,962

Deferred income and other liabilities

715

665

Other current assets and prepaid expenses

849

1,378

Provisions, long-term

66,721

57,887

Employee benefit obligations

28,179

19,808

Property, plant and equipment

1,463

1,708

Other

9,765

8,931

Deferred tax assets

272,026

222,707

 

 

 

Deferred tax liabilities

 

 

Goodwill

0

−3,749

Property, plant and equipment

−30,375

−25,969

Other intangible assets

−154,741

−160,871

Provisions

−3,915

−3,838

Write down of treasury shares for tax purposes

−1,380

−1,380

Other

−1,525

−3,218

Deferred tax liabilities

−191,935

−199,024

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2014

2013

Deferred tax assets

170,895

123,006

Deferred tax liabilities

−90,804

−99,324

Deferred taxes, net

80,091

23,683

In Austria, Telekom Austria Group established a tax group according to section 9 of the Austria Corporate Tax Act, with Telekom Austria AG as the head of the tax group. Deferred tax assets and liabilities for the members of the tax group (currently all significant Austrian subsidiaries) are reported on a net basis since the tax group is a taxable entity.

Impairments for tax purposes according to section 9/7 of the Austrian Corporate Tax Act are treated as temporary differences related to investments in subsidiaries. According to IAS 12.39, no deferred tax liabilities are recorded in that case. Impairments of investments in subsidiaries relate to impairments for which the recognition of expense is deferred over seven years according to Austrian tax law.

The following deferred tax assets were not recognised as the realisation in the near future is not probable according to tax planning.

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2014

2013

Net operating loss carry-forwards

576,323

393,163

Temporary differences related to impairments of investments in consolidated subsidiaries

341,371

113,960

Deferred tax assets not recognised

917,695

507,123

In assessing the recoverability of deferred tax assets, Management considers whether it is probable that all deferred tax assets will be realised. The realisation of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these temporary differences become deductible. Management considers the scheduled release of deferred tax liabilities and projected future taxable income when making this assessment.

Based on long-term positive operative results and projections for future taxable income over the periods in which deferred tax assets become deductible Management believes that in spite of taxable losses in the past it is probable that Telekom Austria Group will realise the benefits of the deferred tax assets recognised in the statements of financial position.

At 31 December 2014, Telekom Austria Group had TEUR 2,714,418 of operating loss carry-forwards. The following loss carry-forwards mainly relating to Serbia will expire in the following years:

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Year

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2015

84,675

2016

2,765

2017

89,503

2018

105,098

2019

119,356

Total

401,397

The remaining net operating loss carry-forwards mainly relate to companies located in Austria and can be carried forward indefinitely. In Austria, the annual usage is generally limited to 75% of the taxable income for a year.

As of 31 December 2014 and 2013, Telekom Austria Group did not recognise a deferred tax liability for temporary differences related to investments in associates in the amount of TEUR 28,003 and TEUR 1,578, respectively.

Income tax receivables relate to fiscal years not yet assessed. As of 31 December 2014 and 2013, income tax receivable mainly relates to Austrian and Croatian subsidiaries. As of 31 December 2014 and 2013, income tax payable mainly relates to foreign subsidiaries.

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