Chrysler 2007 Annual Report Download - page 270

A reconciliation between theoretical income taxes determined on the basis of the tax rates applicable in Italy and the income taxes
reported in the financial statements is as follows:
(in thousands of euros) 2007 2006
Theoretical income taxes 639,976 764,834
Tax effect of permanent differences (608,681) (703,920)
Taxes relating to prior years 3,379 (173)
Unrecognised net deferred tax assets (163,440) (91,501)
Current and deferred income tax recognised in the financial statements, excluding IRAP (128,766) (30,760)
IRAP (current and deferred) 927 5,065
Income taxes reported in the Income Statement (current and deferred income taxes) (127,839) (25,695)
Theoretical income taxes are calculated by applying the IRES tax rate (33% in 2007 and 2006) to the result before taxes. IRAP tax is
excluded to facilitate an understanding of the reconciliation between theoretical and reported income taxes; since it is calculated
on a tax basis that differs from profit before taxes, it would otherwise generate distortions between one year and another.
The permanent differences referred to above include amongst other things the tax effect of non-taxable income in 2007 amounting
to 648,850 thousand euros (837,061 thousand euros in 2006) and of non-deductible costs in 2007 amounting to 40,169 thousand
euros (133,141 thousand euros in 2006). In particular, non-taxable income in 2007 results principally from the reversal of
impairment losses on investments for 431,640 thousand euros (801,685 thousand euros in 2006), dividends for 179,655 thousand
euros (35,128 thousand euros in 2006) and capital gains for 32,840 thousand euros (128 thousand euros in 2006).
Non-deductible costs mainly include impairment losses on investments whose tax effect totalled 20,107 thousand euros in 2007
(117,902 thousand euros in 2006).
Details of deferred tax liabilities net of deferred tax assets are analysed in the following table. The calculation of deferred taxes
takes into consideration the fact that from 2008 onwards the IRES corporate tax rate and the IRAP tax rate will be reduced.
At At
December 31, Recognised in Charged December 31,
(in thousands of euros) 2006 Income Statement to equity 2007
Deferred tax assets arising from:
- Write-downs of investments that are deductible in future years 150,870 (150,870) – –
- Taxed provisions and other minor differences 14,185 (7,553) – 6,632
Total Deferred tax assets 165,055 (158,423) – 6,632
Deferred tax liabilities arising from:
- Measurement of construction contracts by the percentage of completion method (37,645) 473 – (37,172)
- Other (9,994) 1,975 6,956 (1,063)
Total Deferred tax liabilities (47,639) 2,448 6,956 (38,235)
Theoretical tax benefit arising from tax loss carryforward 232,867 (57,643) – 175,224
Adjustments for assets whose recoverability is not probable (353,721) 212,799 (6,956) (147,878)
Total Deferred tax liabilities, net of Deferred tax assets (3,438) (819) –(4,257)
Fiat S.p.A. Financial Statements at December 31, 2007 - Notes to the Financial Statements 269