Chrysler 2007 Annual Report Download - page 124

123Fiat Group Consolidated Financial Statements at December 31, 2007 - Notes
The effective tax rate for 2007 (excluding IRAP) was 19% which represents a decrease over the corresponding rate of 21% in 2006
and is the result of an increased reversal of prior year temporary differences and utilisation of unused tax losses for which deferred
tax assets were not recognised in prior years.
The reconciliation between the tax charges recorded in the consolidated financial statements and the theoretical tax charge,
calculated on the basis of the theoretical tax rate in effect in Italy, is the following:
(in millions of euros) 2007 2006
Theoretical income taxes 915 542
Tax effect of permanent differences 42 (2)
Taxes relating to prior years 21 56
Effect of difference between foreign tax rates and the theoretical Italian tax rate 40 (29)
Effect of deferred tax assets not recognised in prior years (471) (189)
Use of tax losses for which no deferred tax assets were recognised (40) (50)
Other differences 24 13
Current and deferred income tax recognised in the financial statements, excluding IRAP 531 341
IRAP 188 149
Current and deferred income tax recognised in the financial statements 719 490
Since the IRAP tax has a taxable basis that is different from income before taxes, it generates distortions between one year and
another. Accordingly, in order to render the reconciliation between income taxes recognised and theoretical income taxes more
meaningful, the IRAP tax is not taken into consideration; theoretical income taxes are determined by applying only the tax rate in
effect in Italy (IRES equal to 33% in 2007 and in 2006) to income before taxes.
Permanent differences in the above reconciliation include the tax effect of non-taxable income of 236 million euros in 2007 (206
million euros in 2006) and of non-deductible costs of 278 million euros in 2007 (204 million euros in 2006).
The effect of deferred tax assets not recognised in prior years (471 million euros) consists of the income offsetting the tax charge
for the year arising from the net effect of tax benefits representing theoretical deferred tax assets not recognised in prior years
(income of 189 million euros in 2006).
Other differences included unrecoverable withholding tax for 27 million euros (20 million euros in 2006).
Net deferred tax assets at December 31, 2007 consist of deferred tax assets, net of deferred tax liabilities, which have been offset
where possible by the individual consolidated companies. The net balance of Deferred tax assets and Deferred tax liabilities may be
analysed as follows:
At At
(in millions of euros) December 31, 2007 December 31, 2006 Change
Deferred tax assets 1,892 1,860 32
Deferred tax liabilities (193) (263) 70
Net deferred tax assets 1,699 1,597 102