2006 - TCL Communication Technology Holdings Limited

TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED
Notes to Financial Statements
31 December 2006
12. TAX (continued)
According to the Income Tax Law of the PRC on the Enterprises with Foreign Investment and Foreign Enterprises,
TCL Mobile Communication (Hohhot) Co., Ltd. (“Mobile Hohhot”), a subsidiary of the Company in the PRC, is
entitled to exemption from the PRC corporate income tax for two years commencing from its first profit-making
year and thereafter is entitled to a 50% reduction in its PRC corporate income tax for the subsequent three years.
Mobile Hohhot also enjoys preferential tax treatment as being foreign investment enterprises located in the western
region of China, including 50% reduction in national corporate income tax until 2010. As Mobile Hohhot commenced
to make profits in 2002, it was exempt from PRC corporate income tax in 2002 and 2003, and the applicable PRC
corporate income tax rate from 2004 to 2006 was 7.5%. Mobile Hohhot is subject to the PRC corporate income
tax rate of 15% from 2007 to 2010 and 30% thereafter.
No profits tax has been provided in the PRC as no taxable income arose during the year.
During the year, T&A Mobile Phones SA de CV Limited paid royalties to T&A Mobile Phones SAS for general
relations and contract service charge. According to the applicable Mexican withholding tax regulation, the payments
characterised as royalties are subject to a 10% tax on payments defined as royalties under the applicable Mexico –
France tax treaty.
A reconciliation of the tax expense applicable to profit/(loss) before tax using the statutory rates for the countries
in which the Company and its subsidiaries, are domiciled to the tax expense at the effective tax rates, and a
reconciliation of the applicable rates (i.e. the statutory tax rates) to the effective tax rates, are as follows:
2006 2005
HK$’000 % HK$’000 %
Profit/(loss) before tax 32,132 (1,871,446)
Tax at the applicable rates 81,416 253.4 (593,390) 31.7
Lower tax rate for specific provinces or local authority (60,447) (188.1) 258,479 (13.8)
Income not subject to tax (29,212) (90.9) (20,322) 1.1
Expenses not deductible for tax 59,720 185.8 6,882 (0.4)
Tax loss utilised (127,438) (396.6) – –
Tax loss not recognised 92,670 288.4 372,981 (19.9)
Tax charge at the Group’s effective rate 16,709 52.0 24,630 (1.3)
13. LOSS ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
The consolidated profit/(loss) attributable to equity holders of the parent for the year ended 31 December 2006
includes a loss of HK$402,254,000 (2005: HK$1,665,843,000) which has been dealt with in the financial statements
of the Company (note 34(b)).
14. DIVIDENDS
No dividend has been paid or declared by the Company for the year ended 31 December 2005 and 2006.
Annual Report 2006
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