Philips 2015 Annual Report Download - page 133

Group nancial statements 12.9
Annual Report 2015 133
countries with a net deferred tax liability position. Of the
total deferred tax assets of EUR 2,758 million at
December 31, 2015, (2014: EUR 2,460 million), EUR 2,119
million (2014: EUR 1,352 million) is recognized in respect
of scal entities in various countries where there have
been scal losses in the current or preceding period.
Management’s projections support the assumption that
it is probable that the results of future operations will
generate sucient taxable income to utilize these
deferred tax assets.
At December 31, 2015 and 2014, there were no
recognized deferred tax liabilities for taxes that would
be payable on the unremitted earnings of certain
foreign subsidiaries of Philips Holding USA since it has
been determined that undistributed prots of such
subsidiaries will not be distributed in the foreseeable
future. The temporary dierences associated with the
investments in subsidiaries of Philips Holding USA, for
which a deferred tax liability has not been recognized,
aggregate to EUR 78 million (2014: EUR 47 million).
At December 31, 2015, net operating loss carryforwards
expire as follows:
Philips Group
Expiry years of net operating loss carryforwards in millions of EUR
Total 2016 2017 2018 2019 2020
2021/
2025 later
un-
limi-
ted
7,566 - 2 9 176 207 2,459 1,456 3,257
The Company also has tax credit carryforwards of EUR
217 million, which are available to oset future tax, if
any, and which expire as follows:
Philips Group
Expiry years of tax credit carryforwards in millions of EUR
Total 2016 2017 2018 2019 2020
2021/
2025 later
un-
limi-
ted
217 - 4 5 4 2 39 146 17
At December 31, 2015, net operating loss and tax credit
carryforwards for which no deferred tax assets have
been recognized in the balance sheet, expire as follows:
Philips Group
Net operating loss and tax credit carryforwards for which no
deferred tax asset has been recognized in millions of EUR
Total 2016 2017 2018 2019 2020
2021/
2025 later
un-
limi-
ted
2,507 - 4 5 84 103 335 550 1,426
At December 31, 2015, the amount of deductible
temporary dierences for which no deferred tax asset
has been recognized in the balance sheet is EUR 139
million (2014: EUR 190 million).
Classication of the income tax payable and receivable
is as follows:
Philips Group
Income tax payables and receivables in millions of EUR
2014 - 2015
2014 2015
Income tax receivables 140 114
Income tax receivables - under non-current
receivables - -
Income tax payables (102) (116)
Income tax payables - under non-current
liabilities (1) -
Tax risks
Philips is exposed to tax uncertainties. These
uncertainties include, among others, the following:
Transfer pricing uncertainties
Philips has issued transfer pricing directives, which are
in accordance with international guidelines such as
those of the Organization of Economic Co-operation
and Development. As transfer pricing has a cross-
border eect, potential adjustments by local tax
authorities on implemented transfer pricing procedures
in a country may have an impact on results in another
country. In order to reduce the transfer pricing
uncertainties, monitoring procedures are carried out by
Group Tax and Internal Audit to safeguard the correct
implementation of the transfer pricing directives.
Tax uncertainties on general and specic
service agreements and licensing agreements
Due to the centralization of certain activities in a limited
number of countries (such as research and
development, IT, Group functions and head oce),
costs are also centralized. As a consequence, these
costs and/or revenues must be allocated to the
beneciaries, i.e. the various Philips entities. For that
purpose, service contracts such as intra-group service
agreements and licensing agreements are signed with
a large number of group entities. Tax authorities review
these intra-group service and licensing agreements,
and may reject the implemented intra-group charges.
Furthermore, buy in/out situations in the case of
(de)mergers could aect the cost allocation resulting
from the general service agreements between
countries. The same applies to the specic service
agreements.
Tax uncertainties due to disentanglements and
acquisitions
When a subsidiary of Philips is disentangled, or a new
company is acquired, related tax uncertainties may
arise. Philips creates merger and acquisition (M&A)
teams for these disentanglements or acquisitions. In
addition to representatives from the involved business,
these teams consist of specialists from various group
functions and are formed, among 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