Vistaprint 2011 Annual Report Download - page 78

Form 10-K
We had corporate minimum tax credit carryforwards and research and development tax credits
in Canada of approximately $488 and $629, respectively, that expire at various dates through 2031.
As of June 30, 2011, our Bermuda-based subsidiary, Vistaprint Limited, had undistributed
earnings of $136,816 which may be distributed to our parent company, Vistaprint N.V. We have
determined these earnings are not subject to income or withholding taxes upon repatriation.
Undistributed earnings of our remaining subsidiaries are considered to be indefinitely reinvested.
Upon repatriation of those earnings, in the form of dividends or otherwise, we would be subject to
withholding taxes payable. Determination of the amount of unrecognized tax liability associated with
withholding taxes is not practicable due to the complexities associated with this hypothetical
calculation.
For the years ended June 30, 2011 and 2010, the amount of unrecognized tax benefits that, if
recognized, would affect the effective tax rate is $2,153 and $2,085, respectively. We recognize
interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense. The
accrued interest and penalties for the years ended June 30, 2011 and 2010 were $278 and $242,
respectively.
A reconciliation of the gross beginning and ending amount of unrecognized tax benefits is as
follows:
Balance at June 30, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,477
Additions based on tax positions related to the current tax year . . . . . . . . . . . . . . . . . . . 290
Additions based on tax positions related to prior tax years . . . . . . . . . . . . . . . . . . . . . . . 585
Statute of limitation expirations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21)
Balance at June 30, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,331
Additions based on tax positions related to the current tax year . . . . . . . . . . . . . . . . . . . 410
Additions based on tax positions related to prior tax years . . . . . . . . . . . . . . . . . . . . . . . 411
Reductions due to audit settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (656)
Balance at June 30, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,496
It is reasonably possible that a further change in the unrecognized tax benefits may occur
within the next twelve months related to the settlement of one or more audits or the lapse of
applicable statutes of limitations. However, an estimated range of the impact on the unrecognized tax
benefits cannot be quantified at this time. We believe we have appropriately provided for all tax
uncertainties.
We have entered into and operate pursuant to transfer pricing agreements that establish the
transfer prices for transactions among group subsidiaries in Canada, France, the Netherlands,
Jamaica, Spain, Switzerland, Tunisia, Germany, Bermuda, Australia, Japan and the United States.
The determination of appropriate transfer prices requires us to apply judgment. We believe that our
transfer pricing is in accordance with our advanced tax rulings and applicable statutory regulations.
One of our U.S. subsidiaries and one of our Bermuda subsidiaries are under audit by the
United States Internal Revenue Service (IRS). In April 2011, the U.S. subsidiary received a Revenue
Agent’s Report (RAR) from the IRS assessing tax for the years under examination. We disagree with
the position taken by the IRS and have filed a written protest with the IRS Office of Appeals. Also, the
same U.S. subsidiary is under audit by the Commonwealth of Massachusetts. In addition, the Canada
Revenue Agency is auditing one of our Canadian subsidiaries. We do not believe that the resolution
of these tax examinations will have a material impact on our financial position or results of operations.
We conduct business in a number of tax jurisdictions and, as such, are required to file income
tax returns in multiple jurisdictions globally. Generally, the years 2005 through 2010 remain open for
examination by the tax authorities in the tax jurisdictions in which we operate.
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