Wincor-Nixdorf Annual Report 2005/2006

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		€k
	2005/2006	2004/2005
Ongoing taxes on income and profit	–31,032	–28,022
Deferred tax expenses	–21,422	–21,609
Deferred tax income	6,302	14,247
	–46,152	–35,384

The amounts shown above for ongoing taxes on income and profit relate, within Germany, to corporate income tax and municipal corporate income tax plus proceeds from partial release of tax accruals made during the previous year and, in the case of foreign subsidiaries, income-related taxes calculated in accordance with the national tax legislation applicable to the individual companies.

Deferred taxes in the amount of €3,456k (previous year: €2,683k) have been recorded in equity without any effect on profit and loss. They result from the market valuation of the cash flow hedges and of the available-for-sale securities: the tax effect on the settlement of the share-based payment program 2004 in fiscal 2005/2006 has also been recognized directly in equity.

The deferred taxes are the result of time-related variances in reported values between the tax accounts of individual companies and the values of the Group financial statements using the liability method plus capitalization of tax losses capable of being carried forward. As of September 30, 2006, tax losses carried forward in the amount of €1,195k have not been capitalized.

As of September 30, 2006, all German deferred taxes were calculated in respect of temporary differences using a combined tax rate of 39%. The reported value of all deferred taxes on tax losses carried forward was arrived at by using tax rates of 17% for municipal corporate income tax and 26.375% for corporation tax whilst allowing for the ability of municipal corporate income tax to be treated as a tax-deductible expense for corporation tax purposes.

Any dividends payable in the future of Wincor Nixdorf AG will have no effect upon the Group’s tax charges.

Actual tax expenses are €3,770k below those which would be expected to be arrived at through the application of the ultimate parent company’s tax rate for distributions. Last year, mainly due to the effect of extraordinary items, actual tax proceeds were €91k below those which could have been expected.

The table below contains a reconciliation of expected net tax expenses with the actual reported tax:

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		€k
	2005/2006	2004/2005
Group profit before tax	128,005	90,962

Expected tax expenses based on a tax rate of 39% (2004/2005: 39%)	–49,922	–35,475
Differences from expected tax expenses
Difference from local tax rates	8,931	5,247
Difference arising from change of tax rate for deferred taxes	–642	–74
Increases/decreases in tax due to tax-exempt income and non-tax-deductible expenses	–1,693	–1,953
Consolidation entries excl. deferred taxes or with differing tax rates	580	–1,705
Corrections arising from tax audits and other effects	–2,818	–1,364
Valuation allowances on deferred tax assets capitalized for tax losses carried forward	–588	–60
Total adjustments	3,770	91
Actual tax expenses	–46,152	–35,384

The effective tax rate is 36.1% (previous year: 38.9%).

The deferred tax assets and liabilities relate to the following balance sheet items:

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				€k
	Sept.30, 2006		Sept.30, 2005
	Deferred tax assets	Deferred tax liabilities	Deferred tax assets	Deferred tax liabilities
Intangible assets	966	49,870	582	44,893
Tangible assets	1,277	1,907	390	2,220
Financial assets	4	0	0	0
Inventories	12,771	11,271	11,253	3,906
Receivables and other current assets	9,042	129	2,452	6,961
Pension accruals	20,084	547	17,869	100
Other accruals	11,427	145	10,472	354
Liabilities	5,732	6,336	14,174	2,541
Losses carried forward	6,846	0	16,154	0
	68,149	70,205	73,346	60,975
Netting off of deferred tax assets and liabilities	–57,363	–57,363	–48,655	–48,655
	10,786	12,842	24,691	12,320

(6) Income Taxes