21. Tax assets and liabilities
21.1 Consolidated tax group
Pursuant to current legislation, the BBVA Consolidated Tax Group includes the Bank as the Parent company, and, as subsidiaries, the Spanish subsidiaries that meet the requirements provided for under Spanish legislation regulating the taxation regime for the consolidated net income of corporate groups.
The Group’s other banks and subsidiaries file tax returns in accordance with the tax legislation in force in each country.
21.2 Years open for review by the tax authorities
The years open to review in the BBVA Consolidated Tax Group as of December 31, 2011 are 2007 and following for the main taxes applicable.
The rest of the Spanish consolidated entities in general have the last four years open for inspection by the tax authorities for the main taxes applicable, except for those in which there has been an interruption of the limitation period due to the start of an inspection.
In 2011, as a result of action by the tax authorities, tax inspections proceedings were instituted for the years since (and including) 2006, some of which were contested. After considering the temporary nature of certain of the items assessed in the proceedings, provisions were set aside for the liabilities, if any, that might arise from these assessments according to our best estimates.
In view of the varying interpretations that can be made of the applicable tax legislation, the outcome of the tax inspections of the open years that could be conducted by the tax authorities in the future could give rise to contingent tax liabilities which cannot be objectively quantified at the present time. However, the Banks’ Board of Directors and its tax advisers consider that the possibility of these contingent liabilities becoming actual liabilities is remote and, in any case, the tax charge which might arise therefore would not materially affect the Group’s accompanying consolidated financial statements for 2011.
21.3 Reconciliation
The reconciliation of the Group’s corporate tax expense resulting from the application of the standard tax rate and the expense registered by this tax in the accompanying consolidated income statements is as follows:
Reconciliation of the Corporate Tax Expense Resulting from the Application of the Standard Rate and the Expense Registered by this Tax |
Millions of Euros | ||
---|---|---|---|
2011 | 2010 | 2009 | |
Corporation tax (30%) | 1,131 | 1,927 | 1,721 |
Decreases due to permanent differences: | (914) | (559) | (633) |
Tax credits and tax relief at consolidated Companies | (169) | (180) | (223) |
Other items (net) | (745) | (379) | (410) |
Net increases (decreases) due to temporary differences | 262 | (19) | 96 |
Charge for income tax and other taxes | 479 | 1,349 | 1,184 |
Deferred tax assets and liabilities recorded (utilized) | (262) | 19 | (96) |
Income tax and other taxes accrued in the period | 217 | 1,368 | 1,088 |
Adjustments to prior years' income tax and other taxes | 68 | 59 | 53 |
Income tax and other taxes | 285 | 1,427 | 1,141 |
The effective tax rate for the Group in 2011, 2010 and 2009 is as follows:
Effective Tax Rate | Millions of Euros | ||
---|---|---|---|
2011 | 2010 | 2009 | |
Income from: |
|
|
|
Consolidated Tax Group | 487 | 2,398 | 4,066 |
Other Spanish Entities | 2 | (70) | (77) |
Foreign Entities | 3,281 | 4,094 | 1,747 |
Total | 3,770 | 6,422 | 5,736 |
Income tax and other taxes | 285 | 1,427 | 1,141 |
Effective Tax Rate | 7.55% | 22.22% | 19.89% |
In 2011, it presented an effective tax rate that was lower than in previous years due, primarily, to the greater contribution in comparable terms of the income with low or zero tax rate (especially dividends and earnings from entities by the equity method) and of the earnings of foreign entities (especially in the Americas and Garanti) where tax rates are low.
21.4 Tax recognized in equity
In addition to the income tax recognized in the accompanying consolidated income statements, the Group has recognized the following tax charges for these items in the consolidated equity:
Tax Recognized in Total Equity | Millions of Euros | ||
---|---|---|---|
2011 | 2010 | 2009 | |
Charges to total equity |
|
|
|
Debt securities | - | - | (276) |
Equity instruments | (75) | (354) | (441) |
Subtotal | (75) | (354) | (717) |
Credits to total equity (*) |
|
|
|
Debt securities and others | 234 | 192 | 1 |
Subtotal | 234 | 192 | 1 |
Total | 159 | (162) | (716) |
21.5 Deferred taxes
The balance under the heading “Tax assets” in the accompanying consolidated balance sheets includes the tax receivables relating to deferred tax assets; the balance under the heading “Tax liabilities” includes the liabilities relating to the Group’s various deferred tax liabilities.
The details of the most important tax assets and liabilities are as follows:
Tax Assets and Liabilities | Millions of Euros | ||
---|---|---|---|
2011 | 2010 | 2009 | |
Tax assets- |
|
|
|
Current | 1,509 | 1,113 | 1,187 |
Deferred | 6,332 | 5,536 | 5,086 |
Pensions | 1,317 | 1,392 | 1,483 |
Portfolio | 2,143 | 1,546 | 987 |
Other assets | 257 | 234 | 221 |
Impairment losses | 1,673 | 1,648 | 1,632 |
Other | 636 | 699 | 737 |
Tax losses | 306 | 17 | 26 |
Total | 7,841 | 6,649 | 6,273 |
Tax Liabilities- |
|
|
|
Current | 772 | 604 | 539 |
Deferred | 1,558 | 1,591 | 1,669 |
Portfolio | 1,008 | 1,280 | 1,265 |
Charge for income tax and other taxes | 549 | 311 | 404 |
Total | 2,330 | 2,195 | 2,208 |
As of December 31, 2011, 2010 and 2009, the estimated balance of temporary differences in connection with investments in subsidiaries, branches and associates and investments in jointly controlled entities was €527, €503 and €432 million, respectively.