Philips 2006 Annual Report Download - page 99
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Philips Annual Report 2006 99
Tax uncertainties due to disentanglements and acquisitions
When a subsidiary of Philips is disentangled, or a new
company is acquired, related tax uncertainties arise.
Philips creates merger and acquisition (M&A) teams for
these disentanglements or acquisitions. These teams
consist of specialists from various corporate functions
and are formed, amongst other things, to identify hidden
tax uncertainties that could subsequently surface when
companies are acquired and to avoid tax claims related
to disentangled entities. These tax uncertainties are
investigated and assessed to mitigate tax uncertainties
in the future as much as possible. Several tax uncertainties
may surface from M&A activities. Examples of uncertainties
are: applicability of the participation exemption, allocation
issues, and non-deductibility of parts of the purchase price.
Tax uncertainties due to permanent establishments
In countries where Philips starts new operations the
issue of permanent establishments may arise. This is due
to the fact that when operations in new countries are led
from other countries, there is a risk that tax claims will
arise in the new country as well as in the initial country.
Philips assesses these uncertainties before the new
activities are started in a particular country.
Tax uncertainties of losses carried forward
The value of the losses carried forward is not only a matter
of having suffi cient profi ts available within the loss-carried
forward period, but also a matter of suffi cient profi ts
within the foreseeable future in case of losses carried
forward with an indefi nite carryforward period.
54 The Philips sectors 86 Risk management 100 Report of the Supervisory Board 110 Financial Statements