Domestic taxes on income, comparable taxes on income at foreign subsidiaries as well as deferred taxes in accordance with IAS 12 “Income Taxes” are recognised under this item.

The reader is referred to the remarks in Section 3.2 “Summary of major accounting policies” regarding the basic approach to the recognition and measurement of deferred taxes.

Effective 1 January 2016 the raising of the trade tax multiplier for the City of Hannover from 460.0% to 480.0% was approved.

A tax rate of 32.63% (rounded to 32.7%; previous year: 31.93%, rounded to 32.0%) was therefore used to calculate the deferred taxes of the major domestic companies. It is arrived at from the unchanged corporate income tax rate of 15.0%, the unchanged German solidarity surcharge of 5.5% and a trade earnings tax rate of 16.8% (16.1%). The deferred taxes at the companies abroad were calculated using the applicable country-specific tax rates.

Tax-relevant bookings on the Group level are made using the Group tax rate unless they refer specifically to individual companies.

Deferred tax liabilities on profit distributions of significant affiliated companies are established in the year when they are received.

Breakdown of taxes on income

The breakdown of actual and deferred income taxes was as follows:

The following table presents a breakdown of the deferred tax assets and liabilities into the balance sheet items from which they are derived.

The deferred tax assets and deferred tax liabilities are shown unoffset in the above table. The deferred taxes are recognised as follows in the balance sheet after appropriate netting:

In view of the unrealised gains on investments and on currency translation recognised directly in equity in the financial year, actual and deferred tax income – including amounts attributable to non-controlling interests – of EUR 142.8 million (tax expenditure of EUR 258.2 million) was also recognised directly in equity.

The following table presents a reconciliation of the expected expense for income taxes with the actual expense for income taxes reported in the statement of income. The pre-tax result is multiplied by the Group tax rate in order to calculate the Group’s expected expense for income taxes.

The expense for income taxes in the financial year was EUR 150.6 million higher than in the previous year at EUR 456.2 million (EUR 305.6 million). The increase is due in large measure to the sharp rise year-on-year in the pre-tax result. In addition, the increase in the trade tax multiplier of the City of Hannover led to a rise in the expense for deferred taxes.

The effective tax rate amounted to 27.3% (22.3%).

Availability of non-capitalised loss carry-forwards

Unused tax loss carry-forwards and tax credits of EUR 455.4 million (EUR 352.8 million) existed as at the balance sheet date. Making allowance for local tax rates, EUR 164.4 million (EUR 183.1 million) thereof was not capitalised since realisation is not sufficiently certain.

No deferred taxes were established on liabilities-side taxable temporary differences amounting to EUR 57.5 million (EUR 52.3 million as well as assets-side differences of EUR 135.0 million) in connection with interests in Group companies because the Hannover Re Group can control their reversal and will not reverse them in the foreseeable future.

Availability of loss carry-forwards that have not been capitalised: