Philips 2015 Annual Report Download - page 131

8Group nancial statements 12.9
Annual Report 2015 131
Masimo litigation, and accretion expense associated
with other discounted provisions and uncertain tax
positions.
Net nancial income and expense showed a EUR 330
million expense in 2013. Total nancial income of EUR
70 million included a EUR 54 million interest income.
8Income taxes
The income tax expense of continuing operations
amounted to EUR 239 million (2014: EUR 26 million,
2013: EUR 466 million).
The components of income before taxes and income
tax expense are as follows:
Philips Group
Income tax expense in millions of EUR
2013 - 2015
2013 2014 2015
Netherlands 281 665 229
Foreign 1,244 (480) 394
Income before taxes of continuing
operations 1,525 185 623
Netherlands:
Current tax (expense) benet 5 (12) 8
Deferred tax expense (107) (29) -
Total tax (expense) benet of
continuing operations (Netherlands) (102) (41) 8
Foreign:
Current tax expense (274) (250) (242)
Deferred tax (expense) benet (90) 265 (5)
Total tax (expense) benet of
continuing operations (foreign) (364) 15 (247)
Income tax expense of continuing
operations (466) (26) (239)
Income tax expense of continuing operations excludes
the tax expense of the discontinued operations of EUR
54 million (2014: EUR 11 million, 2013: EUR 11 million).
The components of income tax expense of continuing
operations are as follows:
Philips Group
Current income tax expense in millions of EUR
2013 - 2015
2013 2014 2015
Current year tax expense (262) (241) (244)
Prior year tax (expense) benet (7) (21) 10
Current tax expense (269) (262) (234)
Philips Group
Deferred income tax expense in millions of EUR
2013 - 2015
2013 2014 2015
Tax loss carryforwards previously
unrecognized 20 18 7
Current year tax loss carryforwards
unrecognized (29) (65) (86)
Tax assets relating to temporary
dierences unrecognized (3) (47) (31)
Prior year tax (expense) benet 15 34 (7)
Tax rate changes - 12 (19)
Deferred tax (expense) benet
recognized for the current year (200) 284 131
Deferred tax (expense) benet (197) 236 (5)
Philips’ operations are subject to income taxes in
various foreign jurisdictions. The statutory income tax
rates vary from 10.0% to 39.0%, which results in a
dierence between the weighted average statutory
income tax rate and the Netherlands’ statutory income
tax rate of 25.0% (2014: 25.0%; 2013: 25.0%).
A reconciliation of the weighted average statutory
income tax rate to the eective income tax rate of
continuing operations is as follows:
Philips Group
Eective tax rate in %
2013 - 2015
2013 2014 2015
Weighted average statutory income
tax rate in % 29.2 7.9 29.8
Increase (Decrease) in tax rate
resulting from:
- recognition of previously
unrecognized tax loss
carryforwards (1.3) (9.6) (1.2)
- current year tax loss carryfowards
unrecognized 1.9 34.9 13.7
- current year temporary
dierences unrecognized 0.2 25.5 4.9
Non-deductible impairment charges 0.7 1.8 0.1
Non-taxable income (8.9) (100.1) (30.7)
Non-deductible expense 8.1 51.6 20.5
Withholding and other taxes 0.9 13.4 4.9
Tax rate changes - (6.3) 3.0
Prior year tax expense (0.2) (30.8) (0.4)
Tax expense (benet) due to other
liabilities 0.3 5.6 (5.9)
Tax incentives (0.7) (7.4) (0.7)
Others, net 0.4 27.6 0.4
Eective tax rate 30.6 14.1 38.4
The weighted average statutory income tax rate
increased in 2015 compared to 2014, as a consequence
of a signicant change in the geographical mix of actual
prots.
The eective income tax rate is higher than the
weighted average statutory income tax rate in 2015,
mainly due to the non-deductible expenses, new loss
carryforwards and temporary dierences not expected
to be realized which are partly oset by non-taxable
income. Non-taxable income is partly attributable to
favorable tax regulations relating to R&D investments.