World Fuel Services 2012 Annual Report Download - page 95

We operated under a special income tax concession in Singapore which was effective from January 1,
2008 through December 31, 2012. The income tax concession reduces the income tax rate on qualified
sales and the impact of this income tax concession decreased foreign income taxes by $5.5 million,
$8.4 million and $7.8 million for 2012, 2011 and 2010, respectively. The impact of the income tax
concession on diluted earnings per common share was $0.08 for 2012 and $0.12 for 2011 and 2010.
We anticipate that we will continue to operate under the same special income tax concession in
Singapore for the next five years, subject to final approval. The special income tax concession will be
conditional upon our meeting certain employment and investment thresholds which, if not met in
accordance with our agreement, may eliminate the benefit beginning with the first year in which the
conditions are not satisfied.
Income Tax Contingencies
We recorded a decrease of $5.6 million of liabilities related to unrecognized income tax benefits
(‘‘Unrecognized Tax Liabilities’’) and a decrease of $1.7 million of assets related to unrecognized income
tax benefits (‘‘Unrecognized Tax Assets’’) during 2012. In addition, during 2012, we recorded a decrease
of $0.1 million to our Unrecognized Tax Liabilities related to a foreign currency translation loss, which is
included in other income (expense), net, in the accompanying consolidated statements of income and
comprehensive income. As of December 31, 2012, our Unrecognized Tax Liabilities were $33.0 million
and our Unrecognized Tax Assets were $5.1 million.
We recorded a decrease of $0.9 million of liabilities related to Unrecognized Tax Liabilities and a decrease
of $0.3 million of assets related to Unrecognized Tax Assets during 2011. In addition, during 2011, we
recorded a decrease of $0.2 million to our Unrecognized Tax Liabilities related to a foreign currency
translation gain, which is included in other (expense) income, net, in the accompanying consolidated
statements of income and comprehensive income. As of December 31, 2011, our Unrecognized Tax
Liabilities were $38.4 million and our Unrecognized Tax Assets were $6.9 million.
The following is a tabular reconciliation of the total amounts of unrecognized income tax benefits for the
year:
2011 2010
Unrecognized tax benefit – opening balance $25,574 $26,293 $27,158
Gross decreases – tax positions in prior period (7,659) — —
Gross increases – tax positions in current period 5,730 5,890 4,095
Gross decreases – tax positions in current period — (64) (1,629)
Settlements — (62) —
Lapse of statute of limitations (1,251) (6,483) (3,331)
Unrecognized tax benefit – ending balance $22,394 $25,574 $26,293
If our uncertain tax positions as of December 31, 2012 are settled by the taxing authorities in our favor,
our income tax expense would be reduced by $18.0 million of income tax (exclusive of interest and
penalties) in the period the matter is considered settled in accordance with ASC 740. This would have
the impact of reducing our 2012 effective income tax rate by 7.5%. As of December 31, 2012, it does not
appear that the total amount of our unrecognized income tax benefits will significantly increase or
decrease within the next 12 months.
We record accrued interest and penalties related to unrecognized income tax benefits as income tax
expense. Related to the uncertain income tax benefits noted above, for interest we recorded income of
$0.7 million and $0.6 million and expense of $1.4 million during 2012, 2011 and 2010, respectively. For
penalties, we recorded income of $1.5 million and expense of $0.2 million and $1.2 million during 2012,
2011 and 2010, respectively. As of December 31, 2012 and 2011, we had recognized liabilities of
$5.5 million and $6.2 million for interest and $5.1 million and $6.6 million for penalties, respectively.
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2012