Chrysler 2008 Annual Report Download - page 133

The increase of the charge for current taxes in 2008 arises mainly from the increase in the taxable income of foreign companies.
The increase in deferred tax income is mostly due to the recognition of additional deferred tax assets, mainly for temporary
differences arising during the year.
Taxes relating to prior periods include the cost arising from certain disputes with foreign tax authorities.
The effective tax rate for 2008 (excluding current and deferred IRAP) was 16.6% which represents a decrease over the
corresponding rate of 19% in 2007 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:
(€ millions) 2008 2007
Theoretical income taxes 602 915
Tax effect of permanent differences 52 42
Taxes relating to prior years 23 21
Effect of difference between foreign tax rates and the theoretical Italian tax rate 100 40
Effect of deferred tax assets not recognised in prior years (193) (471)
Use of tax losses for which no deferred tax assets were recognised (250) (40)
Other differences 29 20
Current and deferred income tax recognised in the financial statements, excluding IRAP 363 527
IRAP (current and deferred) 103 192
Current and deferred income tax recognised in the financial statements 466 719
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 27.5% in 20087 and to 33% in 2007) to income before taxes.
Permanent differences in the above reconciliation include the tax effect of non-taxable income of €130 million in 2008 (€236 million
in 2007) and of non-deductible costs of €182 million in 2008 (€278 million in 2007).
The effect of deferred tax assets not recognised in prior years (€443 million) consists of the income offsetting the tax charge for the
year (income of €511 million in 2007).
Other differences included unrecoverable withholding tax for €50 million (€27 million in 2007).
Fiat Group Consolidated Financial Statements at 31 December 2008132