Creative 2004 Annual Report Download - page 36

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34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Singapore and other components of income (loss) before income taxes are as follows (in US$’000):
Years ended June 30
2004 2003 2002
Singapore $ 47,990 $ 36,199 $ 45,738
Other countries 78,136 (10,181) (57,924)
Income (loss) before income taxes and minority interest $ 126,126 $ 26,018 $ (12,186)
The provision for income taxes consists of (in US$’000):
Years ended June 30
2004 2003 2002
Singapore $ (10,346) $ 2,464 $ 4,780
Other countries 1,807 256 918
Provisions for income taxes $ (8,539) $ 2,720 $ 5,698
Creative’s effective tax provision for fiscal 2004, 2003 and 2002 reconciles to the amount computed by applying the Singapore statutory
rate of 20.0% for 2004, 22.0% for 2003 and 2002 to income before income taxes and minority interest, as follows (in US$’000):
Years ended June 30
2004 2003 2002
Income tax (benefit) at Singapore statutory rate $ 25,225 $ 5,724 $ (2,681)
Tax excempt income
Singapore (9,050) (11) (13)
Others (12,809) – –
Non-deductible expenses and write-offs 1,159 1,433 3,013
Change in valuation allowances (1,697) (6,106) (657)
Rate differences and others 896 1,680 6,036
Tax refund receivable (12,263) – –
Provisions for income taxes $ (8,539) $ 2,720 $ 5,698
NOTE 10 – INCOME TAXES
Creative was granted a Pioneer Certificate in 1990 under the Singapore Economic Expansion Incentives (Relief from Income Tax) Act,
Cap. 86 for the design and manufacture of digital computer video, audio and multimedia products, including personal computers and
related components, chipsets and software but not including interest income. The Pioneer Certificate exempted income derived from
such activities (“Pioneer Income”) from tax in Singapore, subject to certain conditions. The Pioneer Certificate expired in March 2000.
Creative was granted a new Pioneer Certificate under the International Headquarters Award that will expire in March 2010. Under the
new Pioneer Certificate, profits arising from qualifying activities will be exempted from income tax in Singapore, subject to certain
conditions. As a result of obtaining the new Pioneer Certificate, fiscal 2004 tax write-back includes a $12.3 million reversal of income
taxes. The reversal was related to corporate taxes provided for in full for profits arising from qualifying activities from the commencement
date of the new Pioneer Certificate until the second quarter of fiscal 2004, based on the standard tax rates of 24.5% for fiscal 2001 and
22% for fiscal 2002 and 2003 and 20% for fiscal 2004. These standard corporate income tax rates continue to be applicable to profits
arising from activities excluded from the new Pioneer Certificate.