Philips 2007 Annual Report Download - page 213

Philips Annual Report 2007 219
of EUR 23 million. The result on disposal of xed assets is mainly
of certain activities within Philips’ monitors and at TV business to
on disposal of xed assets related mainly to the sale of buildings in
million). In 2005, other business income and expenses consists of
Interest expense
Net interest expense
nancial assets
Foreign exchange results
Other nancing income (expenses), net
Interest expense decreased by EUR 60 million during 2007, mainly as
In 2007, income from non-current nancial assets totaled EUR 2,952
non-current nancial assets totaled EUR 334 million, and included a
dividend as trading securities. In 2005, EUR 235 million of tax-exempt
In 2007, other nancial charges included an impairment charge of
Technology. In 2006, other nancial charges included an impairment
nancial charges included a EUR 53 million fair value gain on the
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Income taxes
The tax expense on income before tax amounted to EUR 491 million
(2006: EUR 189 million, 2005: EUR 501 million).
The components of income before taxes and income tax expense are
as follows:
2005 2006 2007
Netherlands 427 33 2,678
Foreign 1,187 953 1,664
Income before taxes 1,614 986 4,342
Netherlands:
Current taxes 3 81 (41)
Deferred taxes (123) − (81)
(120) 81 (122)
Foreign:
Current taxes (488) (274) (360)
Deferred taxes 107 4 (9)
(381) (270) (369)
Income tax expense (501) (189) (491)
Philips’ operations are subject to income taxes in various foreign
jurisdictions. The statutory income tax rates vary from 12.5% to
41.0%, which causes a difference between the weighted average statutory
income tax rate and the Netherlands’ statutory income tax rate of
25.5%. (2006: 29.6%, 2005: 31.5%).
A reconciliation of the weighted average statutory income tax rate
to the effective income tax rate is as follows:
2005 2006 2007
Weighted average statutory income
tax rate 32.6 31.6 26.9
Tax effect of:
Changes related to:
utilization of previously reserved -
loss carryforwards (3.2) (2.1) (0.2)
new loss carryforwards not -
expected to be realized 3.2 2.7 0.9
addition (releases) - (9.6) 4.3 (3.5)
Non-tax deductible impairment charges − − 0.2
Non-taxable income (10.3) (20.0) (19.9)
Non-tax-deductible expenses 4.3 11.1 1.2
Withholding and other taxes 16.8 1.7 (0.2)
Tax rate changes 0.7 (6.5) 2.6
Tax incentives and other (3.5) (3.7) 3.3
Effective tax rate 31.0 19.1 11.3
The weighted average statutory tax rate declined in 2007 compared
to 2006 due to changes of the tax rates in certain countries, primarily
due to a reduction in the Netherlands.
The effective tax rate is lower than the weighted average statutory
income tax rate in 2007, mainly due to non-taxable income related
to dividend and the sale of shares of TSMC, releases due to
re-assessment by management, which is partly offset by reductions
of deferred tax assets due to tax rate changes, and by ‘other’ including
re-assesment of uncertain tax positions and prior-year tax returns.
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Group nancial statements
Notes to the IFRS nancial statements
Company nancial statements 250 Corporate governance246 Reconciliation of
non-US GAAP information 258 The Philips Group in the last ten years 260
Investor information