Cemex 2009 Annual Report Download - page 86

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Mr. José Antonio Fernández Carbajal, member of the board of directors at CEMEX, S.A.B. de C.V., is president and chief executive officer of Fomento
Empresarial Mexicano, S.A.B. de C.V. (“FEMSA”), a large multinational beverage company. In the ordinary course of business, CEMEX pays and receives
various amounts to and from FEMSA for products and services for varying amounts on market terms. Mr. Fernández Carbajal is also vice-chairman of the
board of Consejo de Enseñanza e Investigación Superior, A.C. (the managing entity of Instituto de Estudios Superiores de Monterrey or ITESM), of which
Mr. Lorenzo Zambrano, chief executive officer and chairman of CEMEX’s board of directors, is chairman of the board. ITESM has received contributions by
CEMEX for amounts that were not material in the periods presented.
Mr. Rafael Rangel Sostmann, a member of the board of directors at CEMEX, S.A.B. de C.V., is the dean of ITESM.
J. Income taxes
Income taxes
In November 2009, the Mexican Congress approved a new income tax law, enacted and published on December 7, 2009 and that is effective beginning
January 1, 2010. The new law included changes to the tax consolidation regime that will require CEMEX, among other things, to determine income taxes as
if the tax consolidation provisions in Mexico did not exist from 1999 and onward. These changes also required the payment of taxes on dividends between
entities of the tax consolidation group (specifically, dividends paid from profits that were not taxed in the past), certain special items in the tax consolidation,
as well as tax loss carryforwards generated by entities within the consolidated tax group that should had been recovered by such individual entities over
the succeeding 10 years. This new law increased the statutory income tax rate from 28% to 30% for the years 2010 to 2012, 29% for 2013, and decreasing
to 28% for 2014 and future years. Pursuant to the new tax law, the Parent Company will be required to pay in 2010 (at the new 30% tax rate) 25% of the
tax that results from eliminating the tax consolidation effects from 1999 to 2004. The remaining 75% should be paid as follows: 25% in 2011, 20% in 2012,
15% in 2013 and 15% in 2014. In connection with the consolidation effects originated after 2004, these should be considered during the sixth fiscal year
following their origination and will be payable over the succeeding five years in the same proportions (25%, 25%, 20%, 15%, and 15%). Applicable taxes
payable as a result of the changes to the tax consolidation regime will be increased by inflation as required by the Mexican income tax law.
The nominal value of taxes payable estimated by the Parent Company and that will be paid in connection with the aforementioned changes in the law
amounted to approximately $10,461. Based on Interpretation 18, this amount was recognized by CEMEX as a tax payable on its balance sheet against
“Other non-current assets” for approximately $8,216, in connection with the net liability recognized before the new tax law and that the Parent Company
expects to realize in connection with the payment of this tax liability; and approximately $2,245 against “Retained earnings” for the portion, according
to the new law, related to: a) the difference between the sum of the equity of the controlled entities for tax purposes and the equity for tax purposes
of the consolidated entity; b) dividends from the controlled entities for tax purposes to CEMEX, S.A.B. de C.V.; and c) other transactions between the
companies included in the tax consolidation that represented the transfer of resources within such group. As of December 31, 2009, the balance of tax loss
carryforwards that have not been considered in the tax consolidation is approximately $4,024.
As of December 31, 2009, the estimated payment schedule of taxes payable resulting from changes in the tax consolidation regime in Mexico was as
follows:
2009
2010 $ 388
2011 570
2012 716
2013 707
2014 1,281
2015 and thereafter 6,799
$ 10,461
The Parent Company and its Mexican subsidiaries determine income tax on a consolidated basis; therefore, the amounts recognized in the Parent
Company-only financial statements for the years ended December 31, 2009, 2008 and 2007, include the effect of such tax consolidation.
On January 1, 2008, a new law became effective in Mexico, which was named the Minimum Corporate Tax Law (Impuesto Empresarial Tasa Única or
“IETU”) and superseded the Business Asset Tax law (“BAT”). IETU is calculated based on cash flows, and the rate was 16.5% in 2008, 17% in 2009 and
will be 17.5% in 2010 and thereafter. Entities subject to IETU are also required to determine income tax and pay the greater of the amounts between the
two. In broad terms, taxable revenues for IETU purposes are those generated through the sale of goods, the rendering of professional services, as well
as rental revenue. There are certain exceptions, and a taxpayer may consider, as deductible items for IETU calculations, the expenses incurred to conduct
the activities previously described. Capital expenditures are fully deductible for IETU. Each entity should calculate IETU on a stand-alone basis, and tax
consolidation is not permitted. Unlike BAT, IETU is a definitive tax and, unlike income tax, the taxable income under IETU is greater since some deductions
are not permitted, which in some cases may be compensated by the lower IETU rate than the income tax rate. During 2009 and 2008, the Parent Company
and its main subsidiaries in Mexico paid income tax in lieu of IETU, as its income tax exceeded the minimum corporate tax under IETU.
In 2009, 2008 and 2007, income tax benefit (expense) recognized in the Parent Company’s income statements consisted of:
2009 2008 2007
Current income tax $ 13 66 (1,122)
Deferred income tax (554) 5,045 965
$ (541) 5,111 (157)
The Parent Company has accumulated consolidated tax loss carryforwards for its Mexican operations which, restated for inflation, can be amortized against
taxable income in the succeeding ten years according to the Mexican Income Tax Law.