Financial Statements - Solvay

– Current tax represents the tax paid or payable (recovered or recoverable) in respect of the taxable profi t (tax loss) for
the past year, as well as any adjustments to tax paid or payable (recovered or recoverable) in relation to previous years;
– Deferred tax represents the tax which will be owed (or recovered) during future years, but which has already been
recognized during the past year, and which corresponds to the variation in the deferred tax items recorded in
the balance sheet (see below).
The deferred tax charge referring to items accounted for under shareholders’ equity is also recorded in this latter item.
The tax charge breaks down as follows:
EUR Million 2007 2008
Current taxes related to current year -287 -246
Current taxes related to prior years 40 -5
Deferred income tax before valuation allowance 0 109
Unrecognized of deferred tax assets (-/+) -6 3
Tax effect of changes in the nominal tax rates on deferred taxes -84 -4
Total -337 -143
EUR Million 2007 2008
Income tax on items allocated directly to equity 0 1
Total 0 1
Reconciliation of the tax charge
The effective tax charge has been reconciled with the theoretical tax charge obtained by applying to the pre-tax profi t of
each Group entity the nominal tax rate prevailing in the country in which it operates.
EUR Million 2007 2008
Earnings before taxes 1 165 592
Reconciliation of the tax charge
Total tax charge of the Group entitites computed on the basis
of the respective local nominal rates
-350 -154
Weighted average nominal rate 30 % 26 %
Tax effect of non-deductible expenses -128 -195
Tax effect of tax-exempt revenues 243 181
Tax effect of changes in tax rates -84 -4
Tax effect of current and deferred tax adjustments related to prior years -12 -8
Unrecognized deferred tax assets -6 37
Effective tax charge -337 -143
Effective tax rate 29 % 24 %
Analysis of the tax charge
The Group’s effective tax rate (24 %) is lower than the weighted average nominal rate (26 %), owing mainly to
the recapture of tax provisions (EUR 14 million) existing in the Group and to the recognition of deferred tax assets
(EUR 67 million) in Solvay Chemicals International and in Solvay Finance Luxembourg. These positive effects were offset
by the non-deductible impairment on the available-for-sale investment in Fortis.
In 2007, the negative effect of changes in tax rates applied to Italy and Germany.
Financial
75
Solvay Global Annual Report 2008
Financial