46. Related party disclosures in accordance with IAS 24

Related parties as defined by IAS 24 are natural persons and entities on which Volkswagen AG can exercise significant influence, or which have the ability to exercise significant influence on Volkswagen AG, or that are influenced by another related party of Volkswagen AG.

All transactions with related parties are regularly conducted on an arm’s length basis.

Porsche SE held the majority of the voting rights in Volkswagen AG as of the reporting date. The creation of rights of appointment for the State of Lower Saxony was resolved at the extraordinary General Meeting of Volkswagen AG on December 3, 2009. This means that Porsche SE cannot elect all shareholder representatives to the Supervisory Board of Volkswagen AG for as long as the State of Lower Saxony holds at least 15% of Volkswagen AG’s ordinary shares. However, Porsche SE has the power to participate in the operating policy decisions of the Volkswagen Group and is therefore classified as a related party as defined by IAS 24.

According to a notification dated January 8, 2024, the State of Lower Saxony and Hannoversche Beteiligungsgesellschaft Niedersachsen mbH, Hanover, held 20.00% of the voting rights of Volkswagen AG on December 31, 2023. As mentioned above, the General Meeting of Volkswagen AG on December 3, 2009 also resolved that the State of Lower Saxony may appoint two members of the Supervisory Board (right of appointment).

Contribution of Porsche SE’s holding company operating business

The contribution of Porsche SE’s holding company operating business to Volkswagen AG on August 1, 2012 has the following effects on the agreements between Porsche SE, Volkswagen AG and companies of the Porsche Holding Stuttgart GmbH Group that existed prior to the contribution and were entered into on the basis of the Comprehensive Agreement and its related implementation agreements:

• Volkswagen AG continues to indemnify Porsche SE internally against claims by the Einlagensicherungsfonds (German deposit protection fund) after Porsche SE submitted an indemnification agreement required by the Bundesverband Deutscher Banken (Association of German Banks) to the Einlagensicherungsfonds in August 2009. Volkswagen AG has also undertaken to indemnify the Einlagensicherungsfonds against any losses caused by measures taken by the latter in favor of a bank in which Volkswagen AG holds a majority interest.
• Under certain conditions, Porsche SE continues to indemnify Porsche Holding Stuttgart GmbH, Porsche AG and their legal predecessors against tax disadvantages that exceed the obligations recognized in the financial statements of those companies relating to periods up to and including July 31, 2009. In return, Volkswagen AG has undertaken to reimburse Porsche SE for any tax advantages of Porsche Holding Stuttgart GmbH, Porsche AG and their legal predecessors and subsidiaries relating to tax assessment periods up to July 31, 2009. Based on the results of the substantively completed external tax audit for the assessment periods 2006 to 2009, a compensation claim from Volkswagen AG of around €0.2 billion arose for Porsche SE, which was recognized under other operating expenses in the consolidated financial statements in the third quarter of 2023. The claim was settled in the fourth quarter of 2023. The claim has been audited on the basis of the corresponding provisions in the tax clause of the contribution agreement and its merits and amount have been confirmed by external auditors.

Under the terms of the Comprehensive Agreement, Porsche SE and Volkswagen AG had granted each other put and call options with regard to the remaining 50.1% interest in Porsche Holding Stuttgart GmbH held by Porsche SE until the contribution of its holding company operating business to Volkswagen AG. Both Volkswagen AG (if it had exercised its call option) and Porsche SE (if it had exercised its put option) had undertaken to bear the tax burden resulting from the exercise of the options and any subsequent activities in relation to the equity investment in Porsche Holding Stuttgart GmbH (e.g. from recapture taxation on the spin-off in 2007 and/or 2009). If tax benefits had accrued to Volkswagen AG, Porsche Holding Stuttgart GmbH, Porsche AG, or their respective subsidiaries as a result of recapture taxation on the spin-off in 2007 and/or 2009, the purchase price to be paid by Volkswagen AG for the transfer of the outstanding 50.1% equity investment in Porsche Holding Stuttgart GmbH if the put option had been exercised by Porsche SE would have been increased by the present value of the tax benefit. This arrangement was taken over under the terms of the contribution agreement to the effect that Porsche SE has a claim against Volkswagen AG for payment in the amount of the present value of the realizable tax benefits from any recapture taxation of the spin-off in 2007 as a result of the contribution. It was also agreed under the terms of the contribution that Porsche SE will indemnify Volkswagen AG, Porsche Holding Stuttgart GmbH and their subsidiaries against taxes if measures taken by or not taken by Porsche SE result in recapture taxation for 2012 at these companies in the course of or following implementation of the contribution. In this case, too, Porsche SE is entitled to assert a claim for payment against Volkswagen AG in the amount of the present value of the realizable tax benefits that arise at the level of Volkswagen AG or one of its subsidiaries as a result of such a transaction.

Further agreements were entered into and declarations were issued in connection with the contribution of Porsche SE’s holding company operating business to Volkswagen AG, in particular:

• Porsche SE indemnifies the subsidiaries it contributed as part of the business contribution as well as Porsche Holding Stuttgart GmbH, Porsche AG and their subsidiaries against certain liabilities to Porsche SE that relate to the period up to and including December 31, 2011 and that exceed the obligations recognized in the financial statements of those companies for that period.
• Moreover, Porsche SE indemnifies Volkswagen AG, Porsche Holding Stuttgart GmbH , Porsche AG and their subsidiaries against half of the taxes (other than taxes on income) arising at those companies in conjunction with the contribution that would not have been incurred in the event of the exercise of the call options on the shares of Porsche Holding Stuttgart GmbH that continued to be held by Porsche SE until the contribution. Volkswagen AG therefore indemnifies Porsche SE against half of such taxes that the company incurs.
• Additionally, Porsche SE and Porsche AG agreed to allocate any subsequent VAT receivables or liabilities from transactions in the period up to December 31, 2009 to the company entitled to the receivable or incurring the liability.
• A range of information, conduct and cooperation obligations were agreed by Porsche SE and the Volkswagen Group in the contribution agreement.

As part of the IPO of Porsche AG and the sale of ordinary shares to Porsche SE in fiscal year 2022, Porsche SE and Volkswagen AG also entered, among other arrangements, into a “procedural and amendment agreement and agreement to amend the Comprehensive Agreement”. The latter led to amendments to some provisions, including those on appointments to governing bodies of Porsche AG, contained in the Comprehensive Agreement.

IPO of Porsche AG

On September 28, 2022, Volkswagen placed 25% of the preferred shares (including additional allocations) of its subsidiary Porsche AG with investors. These preferred shares have been traded on the stock exchange since the day after the placement. Since the end of the stabilization period on October 11, 2022, the free float of the preferred shares has been 24.2% of the preferred share capital of Porsche AG. The basis for the IPO was a comprehensive agreement to enter into a number of contracts between Volkswagen and Porsche SE. In this context, the two parties agreed that Porsche SE would acquire 25% of the ordinary shares plus one ordinary share of Porsche AG from Volkswagen. The sale of these ordinary shares in Porsche AG by Porsche SE is subject to restrictions until 2027.

Under the share purchase agreement, Volkswagen AG as warrantor provided several warranties to Porsche SE, which essentially put Porsche SE in the same position as buyers of the preferred shares sold under the IPO. In addition, Volkswagen AG assumes a small number of other standard market guarantees, most of them limited to positive knowledge of Volkswagen AG.

The resolution of the extraordinary General Meeting of Volkswagen AG on December 16, 2022 gave rise to the obligation to pay a special dividend and led to a total obligation to the shareholders of Volkswagen AG amounting to €9.6 billion as of December 31, 2022. Out of the total, an amount of €3.1 billion was attributable to Porsche SE.

Volkswagen AG and Porsche SE agreed to offset the obligation to pay a special dividend to Porsche SE against Volkswagen AG’s claim to the payment of the purchase price still outstanding for the second tranche of ordinary shares. In the consolidated financial statements as of December 31, 2022, the purchase price receivable and the dividend liability were therefore presented on a net basis. Upon payment of the special dividend on January 9, 2023, the netting process was completed.

In connection with the IPO of Porsche AG, Volkswagen AG had also assumed obligations for dividend distributions of Porsche AG in 2022. The corresponding dividend of the same amount was resolved at the Annual General Meeting of Porsche AG on June 28, 2023 and paid on July 3, 2023. €114 million of this dividend was attributable to Porsche SE.

Volkswagen AG and Porsche SE have agreed in connection with the IPO and sale of ordinary shares to Porsche SE that representatives of Porsche SE will have a significant presence on the Supervisory Board of Porsche AG. Ultimate decision rights of the shareholder representatives determined by Volkswagen on the Supervisory Board with regard to the ability to direct the relevant activities at Porsche AG within the meaning of IFRS 10 will ensure continued control by Volkswagen AG.

For more detailed information, please refer to the disclosures provided in the consolidated financial statements as of December 31, 2022.

Other related party disclosures in accordance with IAS 24

The following tables present the amounts of supplies and services transacted, as well as outstanding receivables and liabilities, between consolidated companies of the Volkswagen Group and related parties:

The tables above do not contain the dividend payments (net of withholding tax) of €2,450 million (previous year: €2,781 million) received from joint ventures and associates. The tables likewise do not contain the dividends of €1,529 million paid to Porsche SE (previous year: dividends paid or offset of €4,231 million) or the dividend of €1,638 million (previous year: €443 million) paid to the State of Lower Saxony.

The changes in supplies and services rendered to and received from joint ventures and their majority interests relate primarily to supplies to and from the Chinese joint ventures. The changes in supplies and services received from members of the Supervisory Board relate primarily to higher interest payments on direct bank deposits due to higher interest rates.

Receivables from joint ventures are primarily attributable to loans granted in an amount of €12,068 million (previous year adjusted: €10,310 million) as well as trade receivables in an amount of €3,234 million (previous year adjusted: €3,451 million). Receivables from non-consolidated subsidiaries also result primarily from loans granted in an amount of €1,266 million (previous year adjusted: €713 million) as well as trade receivables in an amount of €199 million (previous year adjusted: €219 million).

In addition to the liabilities to associates and their majority interests, there are long-term purchase obligations under battery purchase agreements with Northvolt Group companies.

In the previous year, liabilities to Porsche SE had included Volkswagen AG’s special dividend, after netting against the purchase price receivable for the second tranche of ordinary shares of €22 million, and the obligation arising from Porsche AG’s dividend of €114 million. In the previous year, liabilities to the State of Lower Saxony had included Volkswagen AG’s special dividend of €1,125 million. As of December 31, 2023, there were no dividend liabilities or obligations to Porsche SE or the State of Lower Saxony.

Outstanding related party receivables include doubtful receivables on which impairment losses of €26 million (previous year: €49 million) were recognized. This incurred expenses of €14 million (previous year: €40 million) in fiscal year 2023. The change is primarily attributable to a loan granted to a joint venture.

In addition, the Volkswagen Group has furnished guarantees to external banks on behalf of related parties in the amount of €150 million (previous year: €296 million).

In the fiscal year, the Volkswagen Group made capital contributions of €1,456 million (previous year: €2,854 million) at related parties.

As in the previous year, obligations to members of the Supervisory Board and other related parties relate primarily to interest-bearing bank balances of Supervisory Board members and related parties that were invested at standard market terms and conditions at Volkswagen Group companies.

Obligations to members of the Board of Management include balances outstanding on the annual bonus, the fair values of performance shares granted to the members of the Board of Management and pension provisions of €59.8 million (previous year: €50.0 million).

In addition to the amounts shown above, the following expenses were recognized for benefits and remuneration granted to members of the Board of Management and Supervisory Board of the Volkswagen Group in the course of their activities as members of these bodies:

Employee representatives on the Supervisory Board who are employed by the company continue to be entitled to a regular salary under their contract. This applies accordingly to the representative of senior executives on the Supervisory Board.

The post-employment benefits relate to additions to pension provisions for current members of the Board of Management. The termination benefits relate to the commitments made to Mr. Duesmann in connection with his departure from the Board of Management on August 31, 2023 (previous year: departure of Mr. Diess, Ms. Wortmann and Mr. Aksel).