Creative 2005 Annual Report Download - page 36

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36
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
2005 2004 2003
Singapore $ 18,211 $ 47,990 $ 36,199
Other countries (16,717) 78,136 (10,181)
Income before income taxes and minority interest $ 1,494 $ 126,126 $ 26,018
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, there was a tax write-back of $12.3 million in fiscal year 2004. The
reversal was related to corporate taxes provided for in full for profits arising from qualifying activities from the commencement date of
the new Pioneer Certificate until the second quarter of fiscal year 2004, based on the standard tax rates of 24.5% for fiscal year 2001
and 22% for fiscal years 2002 and 2003 and 20% for fiscal year 2004. These standard corporate income tax rates continue to be
applicable to profits arising from activities excluded from the new Pioneer Certificate.
The provision for income taxes consists of (in US$’000):
Years ended June 30
2005 2004 2003
Singapore $ (1,896) $ (10,346) $ 2,464
Other countries 2,865 1,807 256
Provisions for income taxes $ 969 $ (8,539) $ 2,720
Creative’s effective tax provision for fiscal years 2005, 2004 and 2003 reconciles to the amount computed by applying the Singapore
statutory rate of 20.0% for 2005 and 2004 and 22.0% for 2003 to income before income taxes and minority interest, as follows (in
US$’000):
Years ended June 30
2005 2004 2003
Income tax (benefit) at Singapore statutory rate $ 299 $ 25,225 $ 5,724
Tax excempt income
Singapore (2,971) (9,050) (11)
Others (14,316) (12,809) –
Non-deductible expenses and write-offs 406 1,159 1,433
Change in valuation allowances (81) (1,697) (6,106)
Rate differences and others 19,447 896 1,680
Tax refund receivable (1,815) (12,263) –
Provisions for income taxes $ 969 $ (8,539) $ 2,720