Sun Life 2010 Annual Report Download - page 121

19. Income taxes
In our Consolidated Statements of Operations, the Income tax expense (benefit) for our worldwide operation has the following
components for the years ended December 31:
2010 2009 2008
Canadian income tax expense (benefit):
Current $ (23) $ 240 $ 252
Future 25 (392) 98
Total 2(152) 350
Foreign income tax expense (benefit):
Current 117 (45) (106)
Future 252 (345) (587)
Total 369 (390) (693)
Total income taxes expense (benefit) $ 371 $ (542) $ (343)
The after-tax undistributed earnings of most non-Canadian subsidiaries would be taxed only upon their repatriation to Canada. We
recognize a future tax liability, if any, on these undistributed earnings to the extent that management expects they will be repatriated in
the foreseeable future. To the extent repatriation of such earnings is not currently planned, we have not recognized the future tax
liability. If the undistributed earnings of all non-Canadian subsidiaries not currently planned were repatriated, additional taxes that
would be payable are estimated to be $96 as at December 31, 2010 ($61 and $160 in 2009 and 2008, respectively).
Our effective worldwide income tax rate differs from the combined Canadian federal and provincial statutory income tax rate for the
years ended December 31, as follows:
2010 2009 2008
%%%
Total net income (loss) $ 1,685 $ 622 $ 857
Add: Income taxes expense (benefit) 371 (542) (343)
Non-controlling interests in net income (loss) of subsidiaries 23 15 23
Total net income (loss) before income taxes and non-controlling
interests in net income (loss) of subsidiaries $ 2,079 $ 95 $ 537
Taxes at the combined Canadian federal and provincial statutory
income tax rate $ 634 30.5 $ 30 32.0 $ 175 32.5
Increase (decrease) in rate resulting from:
Higher (lower) effective rates on income subject to taxation
in foreign jurisdictions (189) (9.1) (161) (169.4) (441) (82.1)
Tax (benefit) cost of unrecognized losses 32 1.5 (99) (104.2) 20 3.7
Tax exempt investment income (200) (9.6) (294) (309.9) (49) (9.1)
Changes to statutory income tax rates (1) – (18) (19.0) (30) (5.6)
Other 95 4.5 – – (18) (3.3)
Effective worldwide income taxes $ 371 17.8 $ (542) (570.5) $ (343) (63.9)
Statutory tax rates in the jurisdictions in which we conduct business range from 0% to 35% which creates a tax rate differential and
corresponding tax provision difference compared to the Canadian federal and provincial statutory rate when applied to foreign income
not subject to tax in Canada. This impact is reported in the above table in Higher (lower) effective rates on income subject to taxation in
foreign jurisdictions, which includes a tax benefit of $76 in 2010 associated with the favourable resolution of tax litigation in the U.K. An
offsetting valuation allowance of $23 related to this tax benefit is reported in Tax (benefit) cost of unrecognized losses. For the Tax
exempt investment income, the tax benefit amounted to $200 in 2010 as a result of improving market conditions during the year.
During the recent years, the Canadian federal government and certain provinces enacted legislation reducing corporate income tax
rates. As a result of these enactments, our statutory income tax rates will decline gradually to 26% in 2013 as these rate reductions
become effective. In 2010, the United Kingdom reduced the corporate income tax rates to 27% beginning in April 2011. The reductions
require us to review our future tax assets and liabilities on an ongoing basis. The re-measurement of future taxes in 2010 impacted
both the business attributable to participating policyholders and shareholders. The participating policyholders benefited by $Nil in 2010
($16 and $25 in 2009 and 2008, respectively), while the increase to shareholders’ income amounted to $1 in 2010 ($2 and $5 in 2009
and 2008, respectively).
In December 2010, we sold our life retrocession business. As a result, our income tax expense was $90 higher than expected due to
the write-off of goodwill that was not deductible for tax purposes. The impact of the sale of our life retrocession business is reported in
Other in the table above.
In 2009, Tax (benefit) cost of unrecognized losses included a tax benefit relating to investment impairment losses previously recorded
in SLF U.S. of $101. Tax exempt investment income in 2009 included a tax benefit of $174 recorded as a result of the enactment of the
Canadian tax rules relating to CICA Handbook Section 3855 Financial Instruments – Recognition and Measurement.
Notes to the Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2010 117