Sony 2015 Annual Report Download - page 208

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES
A reconciliation of the differences between the Japanese statutory tax rate and the effective tax rate is as
follows:
Fiscal year ended March 31
2014 2015 2016
Statutory tax rate 38.3% 36.0% 33.6%
Non-deductible expenses 8.9 16.1 1.6
Income tax credits (2.1) (1.4) (2.0)
Change in statutory tax rate 3.6 (66.7) (3.3)
Change in valuation allowances 365.7 221.1 10.7
Change in deferred tax liabilities on undistributed earnings of
foreign subsidiaries and corporate joint ventures 0.2 17.4 (0.8)
Lower tax rate applied to life and non-life insurance business in
Japan (31.0) (24.6) (2.3)
Foreign income tax differential 25.7 (79.7) (6.9)
Adjustments to tax reserves 58.3 (23.1) 0.7
Effect of equity in net income (loss) of affiliated companies 9.0 0.1 0.0
Tax benefit related to intraperiod tax allocation (111.9) (27.2) —
Impairment of goodwill related to mobile communications
business — 159.5 —
Other 2.7 (4.2) (0.2)
Effective income tax rate 367.4% 223.3% 31.1%
In March 2014, the Japanese legislature enacted tax law changes which included lowering the national
corporate tax rate. As a result, the statutory tax rate for the fiscal year ended March 31, 2015 was approximately
36%. This tax law change did not have a material impact on Sony’s results of operations.
In March 2015, the Japanese legislature enacted tax law changes which included further lowering of the
national corporate tax rate, limiting the annual use of net operating loss carryforwards to 65% of taxable income
for the periods ending March 31, 2016 and 2017 and to 50% of taxable income for periods beginning on or after
April 1, 2017, and increasing the net operating loss carryforward period from nine to ten years for losses incurred
in the tax years beginning on or after April 1, 2017. As a result, the statutory tax rate for the fiscal year ending
March 31, 2016 was approximately 33%. The limitation on the use of net operating loss carryforwards, however,
may result in cash tax payments being due if there is taxable income in Japan even though Sony Corporation and
its national tax filing group in Japan have significant net operating loss carryforwards available. In addition, the
limitation on the use of losses, when combined with the relatively short carryforward period, increases the risk of
some net operating loss carryforwards expiring unutilized. The impact of the tax law changes resulted in a net
deferred tax benefit of 26,588 million yen for the fiscal year ended March 31, 2015, primarily due to a reduction
to the deferred tax liabilities in the insurance business in Japan.
In March 2016, the Japanese legislature enacted tax law changes which included further lowering of the
national corporate tax rate, limiting the annual use of net operating loss carryforwards to 60% of taxable income
for the period ending March 31, 2017, to 55% of taxable income for the period ending March 31, 2018, and to
50% of taxable income for periods beginning on or after April 1, 2018. As a result, the statutory tax rate from the
fiscal year ending March 31, 2017 onward will be approximately 31.5%. The impact of the tax law changes
resulted in a net deferred tax benefit of 10,735 million yen for the fiscal year ended March 31, 2016, primarily
due to a reduction to the deferred tax liabilities in the insurance business in Japan.
Under the accounting guidance for intraperiod tax allocation, Sony is required to consider all items of
income (including items recorded in other comprehensive income) in determining the amount of tax benefit that
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