Philips 2009 Annual Report Download - page 179

5Income taxes
The tax expense on income before tax amounted to EUR 100 million
(2008: EUR 256 million, 2007: EUR 582 million).
The components of income before taxes and income tax expense are as
follows:
2007 2008 2009
Netherlands 2,968 330 175
Foreign 1,748 (188) 273
Income before taxes 4,716 142 448
Netherlands:
Current taxes (41) 20 (16)
Deferred taxes (155) (120) (72)
(196) (100) (88)
Foreign:
Current taxes (360) (289) (201)
Deferred taxes (26) 133 189
(386) (156) (12)
Income tax expense (582) (256) (100)
The components of deferred tax expense are as follows:
2007 2008 2009
Previously unrecognized tax loss carried forwards
realized 5 21 1
Current year tax loss carried forwards not realized (38) (98) (60)
Temporary differences (not recognized) recognized 156 (2) 2
Prior year results 25 (7) 119
Tax rate changes (99) (1) −
Origination and reversal of temporary differences (230) 100 55
Deferred tax income (expense) (181) 13 117
Philips’ operations are subject to income taxes in various foreign
jurisdictions. The statutory income tax rates vary from 10.0% to 40.7%,
which causes a difference between the weighted average statutory
income tax rate and the Netherlands’ statutory income tax rate of
25.5%. (2008: 25.5%; 2007: 25.5%).
A reconciliation of the weighted average statutory income tax rate to
the effective income tax rate is as follows:
in % 2007 2008 2009
Weighted average statutory income tax
rate 26.4 (18.5) 17.4
Tax rate effect of:
Changes related to:
- utilization of previously reserved loss
carryforwards (0.1) (14.5) (0.3)
- new loss carryforwards not expected
to be realized 0.8 69.3 13.3
- addition (releases) (3.3) 1.6 (0.4)
Non-tax-deductible impairment charges 0.2 283.1 3.1
Non-taxable income (16.3) (315.0) (25.9)
Non-tax-deductible expenses 1.1 91.9 26.3
Withholding and other taxes (0.2) (5.1) 4.7
Tax rate changes 2.1 1.0 (0.1)
Tax expenses due to other liabilities 1.6 37.2 8.3
Tax incentives and other − 49.2 (24.1)
Effective tax rate 12.3 180.2 22.3
The weighted average statutory income tax rate increased in 2009
compared to 2008, as a consequence of a change in the country mix of
income tax rates, as well as a change of the mix of profits and losses in
the various countries.
The effective income tax rate is higher than the weighted average
statutory income tax rate in 2009, mainly due to new losses carried
forward not expected to be realized, non-tax-deductible impairment
charges and costs, and income tax expenses due to tax provisions for
uncertain tax positions, which were partly offset by non-taxable gains
on the sale of securities and other non-taxable income, as well as
incidental tax benefits, mainly related to the recognition of a deferred
tax asset for Lumileds.
11 Group financial statements 11.12 - 11.12 5
Philips Annual Report 2009 179