Philips 2009 Annual Report Download - page 119

situations in the case of (de)mergers could affect the tax
allocation of GSAs between countries. The same applies
to the specific allocation contracts.
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 reduce 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 establishment may arise. This is because
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.
Tax uncertainties of losses carried forward and
tax credits carried forward
The value of the losses carried forward is not only subject
to having sufficient profits available within the loss-
carried-forward period, but also subject to having
sufficient profits within the foreseeable future in the case
of losses carried forward with an indefinite carry-forward
period. The ultimate realization of the Company’s
deferred tax assets, including tax losses and credits
carried forward, is dependent upon the generation of
future taxable income in the countries where the
temporary differences, unused tax losses and unused tax
credits were incurred and during the periods in which the
deferred tax assets become deductible. Additionally, in
certain instances, realization of such deferred tax assets is
dependent upon the successful execution of tax planning
strategies. Accordingly, there can be no absolute
assurance that all (net) tax losses and credits carried
forward will be realized.
6 Risk management 6.7.4 - 6.7.4
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